Here is my best value stock to buy right now
Value stocks are stocks of companies that trade at low multiples of their earnings or growth potential. Ford engine (NYSE: F) falls into this category, especially as its electric vehicle (EV) business is growing. Let’s explore why this historic automaker could make a great long-term investment.
Electrification is the future
Ford has high hopes for the opportunity for electric vehicles in the United States, which will help support the long-term growth of its home market. Management expects industry-wide electrification rates of 33% and 70%, respectively, in the pickup truck and van markets by 2030. And the company plans to invest more than $ 30 billion over the next few years to achieve a 40% global EV product mix by 2030..
So far in 2021, Ford’s figures help meet these high hopes. In July, the company’s electric vehicle sales jumped 58% to 9,103 vehicles, thanks to the popularity of the Mustang Mach-E and the F-150 PowerBoost Hybrid, launched in the 2021 season. According to CEO Jim Farley, Ford will focus on automotive segments where it already has dominant brands (pickup trucks, transit vans and Mustang sports car). This strategy aligns with Ford’s goal of streamlining its operations, which has led it to exit the U.S. sedan market and lay off thousands of employees in 2019 and 2020.
Ford is transforming itself more into a higher margin niche automaker with a strong focus on electric vehicles. And to achieve that, he’ll need cheap batteries – a lot of them.
The company plans to build 240 gigawatt hours (GWh) of battery cell production capacity around the world by 2030. To put that into perspective, global capacity is currently only around 455 GWh. And Ford is working with Korean energy company SK Innovation to create a joint venture called BlueOvalSK to help it achieve that goal. It also plans to reduce the cost of its batteries by 40% to $ 100 per kilowatt hour (kWh) – mainly through economies of scale and the creation of joint ventures. The company believes it can potentially reduce the cost to $ 80 per kWh by 2030, from the current industry average of $ 137 per kWh.
The future of Ford’s electric vehicles is bright. But in July, internal combustion vehicles still accounted for about 92% of sales volume, and consumer demand is strong despite the shortage of semiconductor chips. Ford is also enjoying easy offsets against the pandemic year of 2020.
Second-quarter revenue jumped 38% year-on-year to $ 26.8 billion as coronavirus headwinds died down. Ford also reported adjusted earnings before interest and taxes (EBIT) of $ 1.1 billion, up $ 3 billion from the previous year period, as Ford Credit’s profits helped offset losses. losses in automobile manufacturing.
While Ford’s legacy auto operations aren’t all that impressive – growth is inconsistent and margins are slim – they give the company a solid platform to kick off its EV transition with a distribution network and chain of global supply.
With a futures price-earnings ratio of around eight, Ford’s valuation is extremely low compared to that of You’re here, the current market leader in electric vehicles, which is trading for about 125 times the profit. Unlike Tesla, Ford is a slow growing company whose operations are still dominated by internal combustion vehicles.
In the long run, however, Ford’s transformation to electric vehicles could boost revenue growth and lead to an upward revaluation of the company’s value.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.