By CCN: The stock price of Ford Motor Company leaped by a staggering 10.7 percent on Friday, allowing the company to achieve a $41 billion valuation and overtake upstart competitor Tesla in total valuation. Two key fundamental catalysts of Ford’s rebound in the first quarter…
By CCN: The stock price of Ford Motor Company leaped by a staggering 10.7 percent on Friday, allowing the company to achieve a $41 billion valuation and overtake upstart competitor Tesla in total valuation.
Two key fundamental catalysts of Ford’s rebound in the first quarter of 2019 were the firm’s profitability in Europe after nine months of net losses and strong sales of pickups in the U.S.
In 2018, Ford brought in a revenue of $160 billion, nearly eight times Tesla’s annual revenue in the same year.
Since the appointment of James Hackett in mid-2017, Ford has been focused on rebuilding the company and its global operations.
The priority of the company, to revive its European business, has been successful. With solid profits and seasonal consumer habits pushing the demand for pick-ups and other commercial vehicles, Ford has seen an unexpectedly strong quarter.
Bob Shanks, the CFO of Ford, said:
“This quarter was a really good start for the year. We expect first-quarter [operating earnings] to be the strongest of the year due to seasonal factors and major product launches ahead. It does, however, put us on track to deliver better company results in 2019 than last year.”
Year-to-date, the stock price of Ford has increased by 33.8 percent from $7.78 to $10.41, easily outperforming the Dow Jones by 17 percent.
In the upcoming quarters, Ford is expected to see a slowdown in sales in comparison to Q1 figures, but with a strong start to the year and with the confidence of investors, Ford is anticipating a bright 2019 ahead.
Analysts like RBC Capital researcher Joseph Spak said that Ford’s strong results were a relief and that it demonstrated the corporate redesign initiated by Hackett is proving to be successful.
“What a relief! Ford reported strong results that showed evidence that (Chief Executive Jim) Hackett’s fitness redesign is taking hold,” Spak said.
According to Goldman Sachs analyst David Tamberrino, Ford could potentially see better results throughout 2019 if the company continues to see progress with restructuring.
“Overall, we believe the results show progress for a company that had not delivered for the past two years and will re-invigorate interest in the potential earnings upside from its restructuring actions,” Tamberrino said.
Due to several scandals such as the explosion of the Tesla Model S in China and the exit of several board members at the company, Tesla has shown weakness in the past month.
Since April 3, the stock price of Tesla has dropped from $291 to $235 – a 19 percent tumble. The downside movement of Tesla intensified as Citron Research is no longer long on the company.
“I do not believe the company is insolvent although I do believe they need to raise money,” wrote Andrew Left, the founder of Citron Research.
Other analysts like Daniel Ives from Wedbush said that it has become difficult to recommend Tesla stock to investors
“To this point, in our 20 years of covering tech stocks on the Street we view this quarter as one of top debacles we have ever seen while Musk & Co. in an episode out of the Twilight Zone act as if demand and profitability will magically return to the Tesla story. As such, we no longer can look investors in the eye and recommend buying this stock at current levels until Tesla starts to take its medicine and focus on reality around demand issues which is the core focus of investors.”
While Tesla is beginning the sale of its Model 3 in the U.K. next week and is planning to expand throughout Europe, the optimism around Ford is expected to be sustained in the upcoming months.
Last modified: January 10, 2020 3:34 PM UTC