Ford Motors (F) along with the other US auto companies — Chrysler and General Motors (GM) — had one of the worst US summer sales results in recent history. Much of it due to the lagging economy and the high gas prices at the pump. The gas guzzling american trucks and SUV’s which used to be good sellers couldn’t compete against the gas sipping foreign car options this year. Getting more miles on the gallon made all the difference in consumers’ choices this summer and unfortunately Ford, GM and Chrysler were slow to react to fickle consumer minds which led to huge losses in 2ndQ ‘08.
On July 24th Ford (F) reported a whopping 8.7 BILLION DOLLAR LOSS on its 2ndQ 08 earnings report. A huge let down among investor who began purchasing Ford shares in the weeks leading to the release of Ford’s earnings and on reasonably good news of gas prices going down. In the month of July before the earnings report was released (July 1-23) Ford share prices rose from $4.71 to $6.03 — a gain of 28% in approximately three weeks. Then Ford released its report on July 24th and to no surprise the stock went down. What I found telling, however, is that the stock only dropped to $5.05 when the market closed on July 25th, which was still a reasonable increase of 7% from July 1, 2008 prices — not bad considering a huge $9 billion loss.
The market’s seemingly casual reaction to Ford’s huge losses basically told me there was still a lot of faith in the company’s value moving forward. In recent news, analyst always seem to ask whether the market has bottomed out and although I don’t have the answer to that question, I do feel that Ford’s share prices have reached the bottom of the barrel based on investors loyalty to hold shares despite some very discouraging big losses. And although your not likely to find many analyst out there giving Ford the buy signal, I feel confident that its shares prices are safe and more likely to rise in the months to follow. If you ask me, it’s time to purchase this stock while it’s at its low and look forward to gains in the long run.
I base my move to buy this stock on Fords announcement to change its direction in the coming months — namely investing more on fuel sipping cars in the very near future. By year’s end Ford announced it will start converting 3 large truck and SUV plants to make small cars such as its popular Ford Focus, Ford Fiesta and two other models yet to be announced. Ford also said it would double its hybrid line from 2 to 4 models in 2009. And although Ford will still continue to manufacture its SUV and Truck pick-up lines — fuel economy is very much kept in mind for future designs. In short, I believe Ford is headed in the right direction and investors seem to agree. Ford closed the market this week at $5.26 a share (8/8/08). My target price for this stock is set for a modest $8.50 by 2010 (+ 61.5%) but I wouldn’t be too surprised if Ford exceeds that.
And that’s the Stock Upside on Ford Motors (F).
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