In the summer, Ford (NYSE:F) traded at multi-decade highs at $16.46. Ford announced an aggressive electric vehicle initiative that excited investors. It also announced an inexpensive Maverick truck hybrid that would increase Ford’s market share.
The honeymoon for F stock ended quickly when Ford issued many negative news headlines.
In August, Ford posted U.S. retail sales falling by 39.6% Y/Y. EV sales rose by 67.3%, though the 8,756 vehicle count is small. Ford boasted that one-third of its retail sales came from presold orders, while it added another 41,000 new orders. Reservations of 130,000 for F-150 Lightning are equally impressive.
The chip shortage remains a major constraint. Ford cannot sell more units, hurting cash flow and delaying its debt repayment. Ford cannot resume its dividend under current conditions. It is not alone in the constraints: Toyota (NYSE:TM) and General Motors (NYSE:GM) must also cut supply.
The chip shortage is beyond a short-term problem. Ford cannot expand margins as it recalls the Bronco (due to the roof) and extends the Mustang Mach-E deliveries. Consumers also face rising gas prices, which will slow vehicle orders.
Ford’s downtrend will continue. The stock is not yet a buy until the selling pressure ends. It could continue falling for a few more months.
