Shares of the Ford Motor Company have fallen much too far. They are off 14% over the past three months, while the S&P 500 is largely flat. The automaker’s progress in the electric vehicle (EV) space alone is enough to justify a much higher price.
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The case against Ford falls into three categories. The first is that a recession will undercut car sales in general. The second is that parts availability will continue to cripple production. The third is that it remains largely a legacy manufacturer. Adam Jonas of Morgan Stanley upgraded Ford from Underweight to Equal Weight. His argument is based largely on the fact that Ford’s share price is low enough to justify a bet on its future, even when the case against Ford may have some merit. That merit has become weak.
Granted, the economy may dip into a recession. Yet, car demand has been pent up for well over a year. Even if some buyers withdraw from the market, that demand will not disappear. As to parts supply problems, there has been brightening news that the microchip shortage problem may end before the close of 2022.
The most powerful case for Ford is its step in the EV market. It has put a better stake in the ground than any other global manufacturer. Its F-150 Lightning is part of the lineup of the top-selling vehicle in America. Millions of people own F-150 legacy models. That is a huge potential market for an EV. In fact, it is the largest such market in history. Ford also has beat Tesla in the race to get an electric pickup to market.
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