Thursday, 28 July 2016

F - car crash stock

Whilst the broader market saw yet another day of micro chop, there was severe weakness in Ford Motors (F), which settled -8.2% @ $12.71. Q2 earnings were a clear miss, and Mr Market is now concerned about increasing problems for the remainder of the year.

F, daily

F, monthly


I'm one of the first who will whine about grossly over-valued stocks, but despite today's earnings, I simply can't remotely tout Ford as anything other than grossly under-valued.

Even with the earnings miss, Ford is generating around $2 EPS a year... that works out to roughly a PE of just 6.


Just reflect on that for a moment..  and then consider the following (trailing) PEs...

AMZN: 309
FB: 76
NFLX: 286

Even AAPL is 12

The mainstream cheerleaders are spooked

From a pure price perspective, next support is around $12, 10, and then $8.

I do not expect any price action <$10.

Typically, after a major earnings miss, a stock will trundle lower for some days, and take a few weeks to cement an initial floor.

So... even if the sp'2250/2300s by October, Ford could still be lurking in the 13/12 zone.

Not on the fence

My argument is that (at the very least) Ford should be valued at least equal to the market average.

Ford is arguably trading around a third of what it should be. Yours truly would seek Ford to at least double.. if not triple the current valuation to the 25-35 zone.. which is a monstrous increase since the Nov'2008 low of $0.85. The yield is around 4.5%... around 3x the US 10yr bond!

As I often say lately, or perhaps you'd prefer a negative yield bond from Japan, or the EU?