- Ford will lose $3 billion on EVs this year
- F stock advanced 2.2% at Thursday’s open, while S&P 500 rises 1% on broad optimism.
- Ford stock has strong support at $11 and is currently advancing toward $12.75.
Ford (F) stock is demonstrating on Thursday exactly why automotive C suites are pivoting to electric vehicles. It is not because of the environment or due to easy profits. It is because the market likes it. Look no further than the headlines on Thursday.
Ford has announced guidance for 2023 that shows a $3 billion loss in its EV segment. That is higher than 2022’s $2.1 billion loss or 2020’s $900 million loss. Despite this seemingly negative news, Ford stock opened up 2.2% at $11.73. The forward-looking automotive sector of the stock market is clearly rewarding heavy investment in the pivot to EVs.
All three major indices advanced on Thursday’s open after the market grew confident that the Federal Reserve’s present hiking cycle was mostly finished based on statements during Wednesday’s presser. The S&P 500 advanced just under 1%, while the tech-heavy NASDAQ moved forward 1.8%.
Ford stock news: Management guides for 8% EV operating margin in future
Ford is hosting a “teach-in” on Thursday with analysts in order to communicate how it will be delivering earnings results in the future. Ford used to transmit results by geography, but now the company will focus on segmentation. The first segment is its traditional internal combustion engine business called Blue. The second is its professional-focused segment called Pro, and the third is the EV business called Model e.
A big takeaway of the information released to reporters on Thursday is that the traditional business remains extremely profitable. Ford’s record 2022 operating profit of $10.4 billion should see a repeat in 2023. The company is guiding for operating profit this year between $9 and $11 billion. With EVs expected to lose $3 billion, this means that Blue and Pro will likely do between $12 and $14 billion in operating profit this year.
The good news regarding Ford’s EV operation is that operating margins that have routinely reached -40% or -50% should come in between -10% and -20% in 2023. Over the longer term, management sees Model e operating margins at 8%.
Ford’s F1-50 Lighting, the electric version of the most popular truck in the US, is back in production. Due to a fire on the assembly line, production was halted back in February. The assembly lines began rolling again, however, on March 13 once it became clear that the issue was not Ford’s fault. Battery supplier SK ON instead was at fault. According to the National Highway Traffic Safety Administration, “production process deviations at the supplier [allowed for a situation where] the cathode aluminium tabs may contact the anode electrode material causing an internal short circuit” during a time when the battery is in a high state of charge.
Ford stock forecast
The daily chart below shows Ford stuck in a downward trending environment. The stock is down around 30% over the past year and more than 100% lower than the high in January 2022. The green area of the chart demonstrates a descending supply zone that began in August 2022, was reached again in November of last year, and then surfaced once more in early February of this year. Before pedalling back into that overhead range, Ford stock first needs to overtake the 21-day moving average, which is currently just above $12.
Ford stock is just coming off a rebound near the long-term support at $11, so it now seems more able to continue the present upward trajectory. Expect Ford stock to at least reach the descending supply zone around $12.75 over the next few weeks. Once there, the price action will let us know whether a third run at $14.50 is in the works.
F daily chart
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Joan Grumbles