Last year was a great time to own Ford Motor (NYSE:F) stock.
With analysts like TV’s Jim Cramer pounding the table for it, the value of Ford shares doubled during 2021. The fourth quarter was especially sweet, with Ford selling over 500,000 cars in the U.S., more than General Motors (NYSE:GM) or even Toyota (NYSE:TM).
Most were full-size pick-ups, the kind that make a sedan owner feel like Gulliver in Lilliput when surrounded by them in a parking lot. The Ford F-150 pick-up was the best-selling vehicle in America last year, with over 726,000 sold.
That’s why the apple of speculators’ eye is the electric version of the Ford F-150, dubbed the Lightning. It’s so hot The New Yorker profiled it.
F Stock: Performance Is Key
But the time for speculation is past. Ford must perform in the market. Unlike Tesla (NASDAQ:TSLA), Ford must sell the Lightning through dealers, which are independent businesses. The focus there is on avoiding price gouging. If you’re worried about the rest of the business, don’t. Ford is telling dealers to stop taking orders on its gas-powered Maverick pick-up. This year’s production is sold out.
The worries over sales have sent Ford stock skidding like worn tires on an icy road. The shares have lost 20% of their value and should lose more on Jan. 24. Still, at about $19.50/share, they’re dirt cheap, compared with any pure electric car stock. The market cap of $82 billion is less than last year’s $134 billion in sales. The price to earnings ratio at Ford is 29 and the dividend yields nearly 2%.
One cause for the drop was Ford’s decision to move the gain in its Rivian (NASDAQ:RIVN) shares to 2022, instead of booking the profit in 2021. But all the car stocks are down right now, as is the market. Tesla’s recent 25% skid has cost its investors over $300 billion. Ford’s drop has cost just $20 billion in market cap.
Worries about financing the electric transition, which dominated last decade when I pounded the table for Ford stock, are now gone. Ford is getting the $30 billion it needs for electric car factories from cash flow. That’s what Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) do, not what AT&T (NYSE:T) does. It should give Ford firmer financial footing than the start-ups, like Rivian and Lucid Group (NASDAQ:LCID), which will need to sell stock or debt when their current cash is spent.
See You After the War
The threat of war is hurting many stocks right now. It should help Ford, which bought defense contractor Quantum Signal in 2019. Ford got an $8.6 billion military contract just in November. The $750 billion U.S. military budget can provide a soft cushion in hard times.
Ford Chairman William Ford has been doubling-down on his own stock in the last year, and now holds 23% of the voting shares. That’s bigger than Elon Musk’s share of Tesla common, which is about 21%, and Musk has been selling.
The Bottom Line
This is a fraught time for the electric car revolution.
Up to this point, luxury vehicles have been drawing buyers ahead of production. That should remain the case in 2022, especially in the pick-up market Ford dominates.
In the short run, my own worries here are overdone. Whichever way the market goes, save complete collapse, Ford looks well-positioned. It has moved its gas-powered production to high-profit vehicles and is now offering electric versions of those vehicles. The result may be some demand replacement – people buying electric pick-ups aren’t buying gas-powered pick-ups. But overall things are going in the right direction.
I’d much rather own Ford stock than Tesla, and that’s a very strange sentence to write. When the current panic ends, I might get some.
On the date of publication, Dana Blankenhorn held long positions in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at [email protected], tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.