The value of Ford stock dropped moderately during the January 25th, 2021 – January 29th, 2021 timeframe. Shares closed the week at $10.53 per share, which represents a decrease of $0.99 per share, or more than 8 percent, compared to the prior week’s closing value of $11.52.
Movement & Ranges
By comparison, shares of Ford’s cross-town rival – General Motors Company – fell $4.72 per share, or 8.5 percent, during the January 25th, 2021 – January 29th, 2021 timeframe.
Ford Stock Factors
The moderate drop in Ford share values during the week comes after last week’s jump of 17 percent, which in turn followed an increase of nine percent. Throughout November and into the first week of December, Ford share values had shown steady growth, although with fluctuations in values.
The drop in Ford share values follows an extraordinarily volatile week of trading for the stock market, as the situation regarding the share values of video game retailer GameStop has seemingly upended any expectations or forecasts set out by Wall Street. Additionally, the continued threat posed by COVID-19 is dashing any expectations of a quick or easy worldwide economic recovery. There is also a growing consensus among analysts that the stock market was overdue for a course correction, as some feel that the market has been overvalued for quite some time and is therefore disconnected from the economic realities facing everyday Americans. In this light, it is easy to see why the value of Ford share values decreased, and why they may continue to do so in the near-term future.
Before this week’s 8 percent drop in Ford share values, it seemed like more investors were viewing Ford shares as a bankable asset in a market that was encouraged by the Biden administration, which was sworn in on January 20th, 2021. But there are several reasons why that sentiment may quickly return, despite the new uncertainties facing the market. The new administration is heavily focused on addressing COVID-19, and Congress is in the early stages of creating an economic aid package for American citizens and state governments. Policymakers, including President Biden, also want to subsidize the industrywide transition away from internal combustion vehicles, and that initiative will likely include consumer facing incentives paired with direct subsidies to automakers, which would certainly help The Blue Oval.
Actions taken by Ford may have impacted share values and, prior to last week, the company’s moves were well received by Wall Street. A prime example is the announcement that Ford will cease manufacturing operations in Brazil. Ford has notoriously been an also-ran in most South American countries, with the markets generally dominated by Volkswagen, Chevrolet, PSA and FCA. Given how sharply the value of Ford stock rose directly after the company made its plan known, investors clearly viewed that step as a sign that Ford is serious about improving the fitness of its business, especially in underperforming regions.
Prior to the announcement, there were several factors that most likely impacted Ford stock values, including Ford Q4 2020 sales as well as for the complete 2020 calendar year. Despite a 10 percent drop in volume during Q4, retail sales only dropped 3.4 percent as showrooms across the United States received their initial shipments of the 2021 Ford F-150, 2021 Ford Bronco Sport, and 2021 Ford Mustang Mach-E. Ford is also still in the process of winding down sales of legacy models, which is contributing to the decrease in overall sales volume.
This is the first time in four weeks that the value of Ford stock has decreased. For the previous three weeks, the value of Ford shares had been on a steadily upward trajectory. That followed a period where Ford stock values had slightly decreased, which occurred during the last three weeks of December 2020. Prior to that, there was a five week-long growth streak in Ford stock values. During that time, there were several factors that likely contributed to increased investor confidence, including the reporting of November 2020 sales, a first for the Dearborn-based automaker in a while, as it had previously switched to a quarterly reporting model before reversing that course of action in October.
While November sales were down 21 percent in the U.S., the overall decrease was primarily the result of 2021 Ford F-150 changeover and the winding down of discontinued Fiesta and Fusion. Overall retail sales decreased 16.7 percent, or slightly more than the 15 percent industry average. However, Ford Super Duty sales remained strong, increasing 7.5 percent year-over-year, a factor that may have given investors more confidence in FoMoCo as it navigates through the fallout of COVID-19.
Prior to that, Ford’s third quarter 2020 earnings, which were headlined by $2.4 billion in net income on revenue of $37.5 billion, offered a surge of momentum for Ford stock. During the timeframe, sales decreased 5 percent to 551,796 units in the U.S., representing a very healthy recovery after the COVID-riddled Q2. It’s worth noting that Ford stock jumped 5 percent when the automaker reported its Q3 earnings, marking the largest single-day percentage gain since June 5th.
“Despite the challenging pandemic environment, our retail unit sales were down only 2 percent and we had our best third quarter of pickup truck sales since 2005,” said Mark LaNeve, who at the time served as vice president of U.S. Marketing, Sales and Service, in describing FoMoCo’s Q3 2020 U.S. sales results. “F-Series finished the quarter on a high note with September sales up 17.2 percent with over 76,000 F-Series pickups sold. This is a testament to our winning product portfolio and the performance of our great dealers,” he added.
Ford sales increased 25 percent in China during the third quarter of 2020, building on the three percent growth experienced during the second quarter of 2020. Notably, Q3 2020 represented FoMoCo’s single biggest sales increase in China since 2016.
Meanwhile, CEO Jim Farley’s recent statements about affordable EVs and his goal of curbing warranty costs could also have positively influenced past share values. Additionally, the new CEO recently outlined key goals and organizational changes, which include:
- An expansion for Ford’s leading commercial vehicle business with a suite of software services that drive loyalty and recurring revenue streams.
- Offering compelling, uniquely Ford fully electric vehicles at scale around the world, including the Ford Transit, Ford F-Series, Ford Mustang, SUVs, and Lincoln models.
- Adding more affordable vehicles to Ford’s global lineup, including in North America.
Another noteworthy factor was the overwhelmingly positive reception of the all-new 2021 Ford Bronco and 2021 Ford Bronco Sport. In fact, Ford stock experienced four consecutive weeks of growth following the reveal of the off-roaders. The limited-production First Edition model of the Bronco two-door and four-door sold out in just a few hours, prompting Ford to double availability. The Bronco Sport First Edition sold out in less than two days. All three Bronco models have seen massive interest, causing significant traffic spikes on the automaker’s website as Bronco reservations exceeded 165,000 in the first three weeks of availability. The Ford Bronco Sport started rolling out to dealers in late November 2020. Ford moved 5,120 examples of the Bronco in December 2020.
Besides the (delayed) Bronco and Bronco Sport, Ford is currently launching the all-new 2021 F-150 – its most profitable and revenue-generating product. The all-new half-ton, full-size pickup features a significant amount of updates and new features, along with an all-new exterior and interior.
Production of the 2021 F-150 started on September 17th, 2020 at the Ford Dearborn Truck plant within the Ford Rouge Center complex, while production commenced at the Ford Kansas City plant on November 19th, 2020. The truck will see a gradual rollout before hitting full stride in roughly two or three quarters after start of production. Additionally, Ford recently broke ground on a new plant within the Rouge Center. Termed the Ford electric vehicle center, the new facility will build the upcoming electric F-150, which is slated for launch in 2022. Ford recently increased production capacity at the plant by 50 percent.
Prior to the reveals of the F-150 and Bronco family, Ford and Volkswagen agreed upon the finer details of a new partnership wherein both automakers will develop and produce several vehicles. Additionally, the tie-up will see VW invest several billion in Argo AI, an autonomous software firm backed by Ford. Speaking of partnerships, recent reports indicate the Ford-Rivian partnership is “going great” and that a new Ford model stemming from the tie-up is on track.
Ford stock has seen historically-low values during the COVID-19 pandemic, with some being the lowest recorded in over a decade. This week’s $10.53 per share price places the value at $1.11 above the $9.42 per share mark at which Ford stock opened the 2020 calendar year, which may be a sign that a more sustained turnaround is on the horizon, although the global economic and political climate remains in a very precarious state right now.
The Blue Oval has had to navigate unprecedented setbacks during COVID-19. For starters, the Coronavirus pandemic forced Ford to idle production across North America, South America, Europe and China, putting the firm in an unfortunate position. The scenario resulted in a steep decline in revenues and an accelerated cash burn, resulting in a loss-making scenario for Ford, and for the industry at large.
Ford production in China resumed in March, Ford Europe production started back up on May 4th and most North American Ford production resumed on May 18th. The restart in production hasn’t been a completely smooth endeavor, as various facilities were forced to pause production for up to 24 hours for cleaning and area disinfection after workers tested positive for COVID-19. Additionally, supplier-related disruptions have forced Ford to temporarily suspend production at the Ford Louisville Assembly plant, which produces the Ford Escape and Lincoln Corsair. That shutdown comes after the earlier supplier disruption which prompted Ford to delay the launch of the 2021 Ford Bronco, which will now reach dealerships in mid-2021.
Ford has also announced that certain versions of the Bronco Sport are seeing delays, and the ongoing microchip shortage – another COVID-19 related complication – is forcing The Blue Oval to suspend production at the Ford Saarlouis Body and Assembly plant in Germany for one month and cut two shifts at the Ford Chicago Assembly plant for the first week in February. The Chicago plant produces the Ford Explorer and Lincoln Aviator, two very important vehicles for The Blue Oval. These latest developments arrive as Ford is still struggling to launch the Ford Bronco, which will see even more delays, as suppliers continue to be impacted by the pandemic.
Ford has taken major steps to steer through the COVID-19 pandemic. Until recently, the automaker’s actions had primarily revolved around reducing and/or deferring expenses and shoring up cash. To that end, Ford suspended its dividend while borrowing $15.4 billion in March before borrowing another $8 billion in April. But with the winding down of manufacturing facilities in Brazil, the company has demonstrated that nothing is off the table when it comes to getting the company back to a more sustainable financial footing.
While it was taking all of these actions during idled vehicle production, The Blue Oval has been producing shields, face masks, and respirators to help medical workers fight the virus on the front lines. Ford will continue making the PPE, at an accelerated pace in some instances, now that vehicle production has restarted.
Ford also helped suppliers get through the trough created by the pandemic by paying its bills ahead of schedule.
In May, Jim Farley, who at the time served as COO, bought $1 million in Ford stock, making it the largest open-market share purchase by a Ford executive in a decade. Then, in early August, then-Ford CEO, Jim Hackett, announced an early retirement. He is succeeded by Farley.
The fitness of the Ford Motor Company had several business-related issues well before the global COVID-19 outbreak, including lack of profitability in several key vehicle lines and in international regions, along with quality issues associated with critical product launches. To that end, then-Ford CEO Jim Hackett replaced Joe Hinrichs with Jim Farley as COO, allegedly due to major issues associated with the rollout of the all-new 2020 Ford Explorer and Lincoln Aviator.
Ford announced even more changes to its executive ranks in late April of 2020. The changes, made by Farley after a 10 week-long deep dive, were presented as a way to “better serve customers, streamline decision-making and increase accountability.”
It will be interesting to see how Ford stock will perform in 2021, especially in light of various actions taken by the Dearborn-based automaker to improve the fitness of its business. These actions include discontinuing all sedans to focus on more profitable crossovers, SUVs, and pickups in North America, while at the same time investing in resource-intensive autonomous vehicle technologies like its Argo AI autonomous service as well as electric vehicles like the Ford E-Transit.
“The key here is, not just for us, the sedan segment itself has been in decline for a very long time, and that decline has been accelerating over the last few years,” Kumar Galhotra, President of Ford North America, told Ford Authority executive editor, Alex Luft, in a recent interview.
It’s worth noting that The Blue Oval started both efforts much later than its direct rivals. For instance, FCA was the first to discontinue most of its sedan portfolio and General Motors started to invest heavily into EVs and autonomous vehicles much earlier than The Blue Oval.
Production of the Mach-E kicked off in late October, and the very first units of the all-new Ford Mustang Mach-E have started to arrive at U.S. dealers. Ford delivered its first three examples in December 2020. The first batch of units have also already reached Europe. Automotive outlets recently released their impressions of the Mach-E, and nearly every publication has praised the EV for its good looks, engaging driving dynamics, and upscale interior. Unfortunately, Ford recently announced a stop-ship on the EV in order to address a quality-related issue, but it is unclear what effect, if any, that announcement might have on the value of Ford stock going forward. Additionally, Ford recently announced that the Mustang Mach-E will be produced in China for customers in that market.
The Mach-E is an electric, four-door crossover-like hatch inspired by the legendary Mustang pony car. More than anything else, the Mustang Mach-E demonstrates that Ford isn’t afraid to redefine legendary nameplates, and recreate them in new body styles and as new vehicle types.