Ford is a long-established player in the automotive industry, focusing on various vehicle types, including conventional gasoline cars, hybrids, and a growing lineup of electric vehicles. Despite being a major player in the automotive industry, Ford faces significant challenges, especially in the competitive EV market, alongside traditional automotive concerns.
Ratings Downgraded
One of the key drivers behind the stock’s performance has been an analyst downgrade by Jefferies. The firm lowered its rating on Ford from “Hold” to “Underperform” and slashed its price target from $12 to $9.
The rationale for this downgrade includes concerns over rising U.S. inventories, a lack of clarity in Ford’s electric vehicle strategy, and persistent structural cost challenges. Such downgrades can significantly impact investor sentiment and stock valuation, especially when they highlight long-term strategic issues.
Production Management
A notable area of concern for Ford is its inventory management. Despite robust sales figures, the company’s U.S. inventory levels have reached 96 days, which is notably higher than those of its competitors.
High inventory levels can signal potential overproduction or weaker-than-expected demand, both of which could pressure future profitability. Investors are wary of the implications, as carrying excess inventory not only ties up capital but also risks potential discounting to clear stock, which can erode margins.
Ford decided to suspend production of the F-150 Lightning electric pickup from mid-November to January 6 in response to high inventory levels and decreasing demand. This action indicates the struggles Ford faces in pivoting towards electric vehicles while maintaining its traditional truck market.
Q3 Earnings
In the third quarter of 2024, Ford reported revenue of $46.2 billion, a 5% increase from the same period in 2023. Despite this revenue growth, net income declined by 25% year-over-year to $900 million, or 22 cents per share, missing analysts’ expectations.
Ford’s EV division, Model e, reported a loss of $1.2 billion (Source: Investopedia) for the quarter, contributing to the company’s decision to lower its full-year adjusted EBIT guidance to approximately $10 billion, down from the previously estimated range of $10 billion to $12 billion. This adjustment reflects challenges in the EV market, including increased competition and pricing pressures.
Jobs Cut
Ford announced a reduction of 4,000 jobs in Europe, including 800 in the UK, to combat significant losses and slow EV demand. This move reflects deeper structural adjustments aimed at maintaining efficiency amidst increasing competition in the EV sector.
EV Strategy
Ford’s EV strategy has come under scrutiny. While the automotive industry is rapidly transitioning toward electrification, investors have expressed concerns (Source: Marketwatch) over the lack of a cohesive and competitive EV roadmap from Ford.
As competitors like Tesla and General Motors gain ground in the EV market, Ford’s position remains uncertain. Without a clear strategy, the company risks falling behind in what is widely regarded as the future of the automotive industry.
Technical Analysis
Source: TradingView
The stock seems to be in a strong downtrend with price moving below its major support around $10.31, forming new lows. All 3 EMAs are above the price which could also add bearish pressure.
If bearish pressure carries on, price could continue its trend downwards, with traders keeping a close eye on the $9.45 level as a new potential support. If price can pull back, bulls may look to recapture ground above $10.31, potentially reversing the trend.
