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Can commercial electric vehicles drive the Ford share price higher?

The Ford [F] stock price has dipped after reaching a 20-year high, but a major push towards electrification, particularly in the commercial vehicle space, could lift the automaker’s share price.

According to CEO Jim Farley, Ford is looking to become the world’s second-largest electric vehicle manufacturer within the next two years. The company plans to spend as much as $30bn on electric vehicles by 2025 and aims to increase its EV production capacity to 600,000 units by the end of 2023. With a thrust towards commercial vehicles, Farley believes Ford could become the segment leader, much like Tesla is in passenger EVs.

If the automaker can deliver on its promises and maintain an edge on its rivals in the EV market, these developments could help boost the Ford share price.

The Ford stock price outperformed its competitors

Although 2021 was a turbulent year for the company, marked by supply chain disruption and semiconductor shortages, improved sales numbers and progress in the EV space have helped push the Ford share price higher.

Ford stocks jumped 21.3% in the first two weeks of the year, though they have since fallen to $19.89 at the close on 3 February.

The company missed analyst earnings estimates when reporting its December quarter adjusted earnings per share of $0.26 on the back of forecast-beating revenues of $37.7bn.

$37.7billion

Ford's December quarter revenues beat analyst estimates

 

Customers “have already ordered or reserved more than 275,000 all-electric Mustang Mach-E SUVs, F-150 Lightning pickups and E-Transit commercial vehicles – and we’re breaking constraints to deliver every one of them as fast as we can,” said Farley.

Despite the most recent correction, the Ford share price has surged 85% in the past year compared with the S&P 500’s rise of 16.9%.

The Ford stock price also outperformed rivals General Motors [GM] and Tesla [TSLA], which were up 0.7% and 2.1%, respectively, over the same period.

Ford aims to be the Tesla of commercial EVs

Ford has been ramping up production of electric vehicles, particularly the electric version of its popular F-Series model, which has been the best-selling truck in the US for 45 years.

The company began pre-production of an all-electric version of its pickup truck, the F-150 Lightning, in September 2021. The model was met with a positive response, so much so that Ford had to close reservations after booking 200,000 orders.

To meet the strong demand, the automaker is increasing its production capacity of the F-150 Lightning to 150,000 units per year by mid-2023, more than three times the original target.

Although Ford is launching other electric versions of its cars and SUVs, the company believes that its commercial offering — which also includes its E-Transit electric van — is where it will have a significant lead against the competition.

This was something Farley hinted at when he said “We are the Tesla of this industry” an event on 25 January.

“We are the Tesla of this industry” - Ford CEO John Farley on the commercial EV sector

 

However, with other companies also launching electric pickup trucks, Ford will need to maintain this momentum to keep up with its rivals, although it is currently ahead of the game — Rivian has only delivered a few hundred units of its electric pickup truck in the US and will likely take years to ramp up its production, and Tesla’s Cybertruck has been delayed to 2023.

Analysts are bullish on Ford stock

According to The Fly, JPMorgan analyst Ryan Brinkman raised his price target for Ford stock from $20 to $23. However, Jefferies downgraded Ford’s stock rating to ‘hold’ from ‘buy’ earlier in January, mainly on valuation concerns.

Similarly, RBC Capital analyst Joseph Spak downgraded Ford stock rating to ‘sector perform’ from ‘outperform’, though he raised the stock’s price target from $21 to $26.

According to MarketScreener, analysts are generally bullish on the Ford share price. The stock has a consensus ‘outperform’ rating with an average price target of $22.28, representing a 12% increase from its closing price on 3 February.

With strong demand in the commercial sector and efforts to boost production capacity, Ford’s EV ambitions could be a green light for the company’s share price.

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