Ford's (NYSE:F) Turnaround Outpaces the Automotive Market

After a long period of stagnation, Ford Motor Company (NYSE: F) is hitting price levels not seen in years. It is evident that the company's plan for an EV turnaround is working, as Ford was the best performing automobile stock in 2021.

The company is now worth over $100bn, the largest market cap in its rich history.

View our latest analysis for Ford Motor

Lincoln Shines in China, Partnership with Stripe

Ford finished 2021 strong, with the order tally for new vehicles at 70,000 in December, compared to 58,000 in 2020. In addition, the company is doing very well in China, with sales rising 3.7% in 2021, Y/Y. Chinese do love their luxury since Lincoln was the growth leader in China, with 2021 sales surpassing 91,000 units.

Meanwhile, Ford is partnering up with Stripe, signing a five-year deal. As a part of the strategy to revamp the e-commerce payment infrastructure, Ford Motor Credit Company (Ford's financial services arm) will use Stripe's digital payment technology to process its online transactions. Terms of the partnership were not disclosed, but Stripe will likely earn commission per transaction it processes.

Yet, Ford's outstanding performance is starting to draw caution, as RBC Capital Market downgraded the stock from Outperform to Sector Perform. Their analyst Joseph Spak expects the share price to consolidate after breaking the milestone market cap. Furthermore, Mr.Spak stated that they believe Ford will eventually sell their stake in Rivian Automotive (NASDAQ: RIVN). RBC sees the price target at US$26, slightly above the current levels.

What's the opportunity in Ford Motor?

Our valuation model shows that the intrinsic value for the stock is $32.20, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Ford Motor's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market.

If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Ford Motor look like?

Future outlook is an important aspect when you're buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a low price is always a good investment, so we need to consider the company's future expectations.

Ford Motor's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? You are probably pleased with your recent returns. Our valuation analysis shows that this growth has not yet been fully factored into the share price despite the strong performance. If you are looking to boost your position, you might want to wait for a pullback.

Are you a potential investor? If you've been keeping an eye on F for a while, you might want to resist the temptation to chase this run-up. Ford stock moves quite a bit, and you will likely get an opportunity to buy on the pullback, especially given the current state of the broad market. But before you make any investment decisions, consider other factors such as the strength of its balance sheet to make a well-informed investment decision.

Keep in mind, when it comes to analyzing a stock, it's worth noting the risks involved. Every company has risks, and we've spotted 3 warning signs for Ford Motor (of which 1 makes us a bit uncomfortable!) you should know about.

If you are no longer interested in Ford Motor, you can use our free platform to see our list of over 50 other stocks with high growth potential.

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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.