Investors, including this one, have been here before. Ford (F) announces an exciting new product and the market offers higher company shares. When Ford stumbles upon the launch, the stock falls. This time, Ford’s Mustang Mach-E is a winning potential product but it won’t steal From tesla (TSLA) thunder.
For now, Tesla can enjoy a market capitalization of $ 305 billion, compared to Ford worth $ 28 billion and General Motors (GM) worth $ 37.5 billion. And as Tesla runs at a stock price of $ 2000, it will be worth higher than Toyota (TM), GM, and Ford combined.
What will it take for Ford to take part in Tesla advertising? The Ford Bronco already shows early signs of success. Not only does it look better than the simplistic Tesla Cybertruck, but it also serves a market that Tesla can’t tackle: the American off-road adventurer.
Broad appeal
The Bronco is an effective bet that the demand for sports vehicles will continue to increase. To address a broader market, the company is debuting with six trim levels. The off-road features are also a revelation. Each trim has a standard two-speed transfer case and a seven-speed manual transmission.
As a capable off-road truck, Cybertruck cannot have the range powered by battery alone. Also, Bronco can automatically switch between 2H and 4H. With even bigger tires, its off-road capability and range will outpace that of the Fiat Jeep Wrangler (FCAU). Muddy terrain tires, off-road protection (such as “bash plate” and “Go on any terrain” (or GOAT) modes), consumers have many options to choose from.
Ford’s strong appeal is not just overkill, either. He had to double the production of the First Edition amid high demand. The absence of the Bronco raised the value of older models. For example, a 1974 Bronco sold for $ 650,000 in January 2020. His absence of almost 25 years could explain the great interest.
Skeptics will argue that Ford is only increasing First Edition Bronco output from 3,500 to 7,000 units. Starting at $ 59,305, owners of this rare unit will become brand ambassadors who will create more excitement that drives sales of other Bronco models.
Expected product quality
Unless the Bronco has unreliable internal parts that break, the vehicle is designed for rugged use. Just as customers enjoyed a well-built Ford Raptor and F-150, the Bronco should be equally reliable. Ford management urgently needs a win with this release. When it launched Ford Explorer and Lincoln Aviator, the company faced many quality control issues. In what should have been a popular seller on the full line of SUVs and luxury, Ford ended up reserving considerable costs that hurt stock prices and punished shareholders.
Fair value
Ford’s shares spent half the year in the dog’s house. Bronco’s release reversed the negative sentiment when investors overlooked the 23-cent loss in EPS posted on April 28, 2020:
Chart courtesy of Stock Rover Visuals
The chart above shows the stock break above the main moving averages. It could recover to $ 9.00 where it was before COVID-19. Conversely, the quantitative analysis suggests that Ford’s fair value is $ 4.65, 34% below the recent price of $ 7.00:
Data courtesy of Stock Rover
Compared to its peers, Ford has a value score of 90/100, ahead of GM, Fiat, and Toyota:
The downward target price aligns with the stock’s valuation score:
Source: SA Premium
Ford’s EBITDA Forward and sales could improve dramatically as Bronco’s order numbers soar. When Mach-E sales begin, investors will have another alternative to investing in electric vehicles.
Previously, investors who sold short Nikola (NKLA) in the EV hype hype made a huge profit. Boy (NIO) stocks traded higher as markets searched for a cheaper alternative to Tesla stocks. As I explained here, traders should have expected the drop in Nio shares. If it continues to decline, investors can search for value and buy Ford shares.
Your takeaway food
Ford will sit quietly on our speculative DIY shopping list for a long time. Beyond its July 30 earnings report, Bronco’s growing demand may lift the stock to pre-COVID-19 levels. Because Tesla enjoys lots of thunder that raises its stock price, Ford is only in the early stages of getting that same boost.
It will build on a neglected off-road market that other automakers neglected. Ford will also have a moat with the Bronco that has long been absent from its business.
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Divulge: I am / we are long F. I wrote this article myself and express my own opinions. I receive no compensation for it (other than Seeking Alpha). I have no business relationship with any company whose shares are mentioned in this article.
