Ford has recently restructured its company and started setting goals for its EV (electric vehicle production) in the next several years. If its plans materialize then Ford stock (F) could move substantially higher.
On March 14, Ford said it plans on producing 2 million EVs by the end of 2026. Moreover, it expects half of its global volume to be EVs by 2030.
So far Ford says it has sold 13,772 "electrified" units in 2022 as of March. This is after it sold over 27K of its Mustang Mach-E vehicles in 2021. It has yet to start delivering its electric F-150 Lightning pickup trucks, which should happen soon.
However, the company recently said that it plans on doubling its BEV capacity in Europe to 600,000 by 2026.
Compare this with Tesla (TSLA) which made over 930K units in 2021, including 305.8K in Q4 alone. With its 2 new plants now online Tesla will be able to more than double production.
So, Ford plans on catching up with Tesla's present capacity within 4 years. Both would have 2 million or more in production capacity for electric vehicles.
Comparing Ford and Tesla
Right now Tesla has a market valuation of over $1.08 trillion (i.e., $1,081 billion). But Ford is at $61.85 billion. So Tesla's market value is 17.5 times the size of Ford. Ford is 5.7% of the size of Tesla.
Keep in mind that Ford made almost 4 million cars and trucks (3.94 million). The market clearly does not value its ICE (internal combustion engine) production very much.
And there are good reasons it shouldn't. Compare the two companies' profits. Tesla made $5.5 billion in GAAP net income and $5.0 billion of free cash flow (FCF) in 2021.
But Ford, which made 4 times the number of cars of trucks (3.9m vs. 0.9m), made net income of $17.9 million, but only $4.59 billion in adj. free cash flow. That was less FCF than Tesla with a quarter of the production.
Here is another way of looking at it. Tesla made $6,091 in FCF per EV car it produced. But Ford made just $1,164 per vehicle it produced.
So you can see why the market values EV production much more than ICE production.
Where This Leaves Ford Stock
Let's assume that Ford makes 2 million EVs by 2026. Actually, even if it made 1 million by 2026, it could potentially have a 1 trillion market cap. This assumes that the market values it the same as Tesla.
The potential return for investors is quite high. Over the next four and three-quarter years, Ford could jump 17.5 times. On a compounded basis that works out to a potential annual return of 82.68% each year.
In fact, just to be conservative, let's say the market value increases 10 times over the next four years. This could easily happen once the market sees that Ford is serious about getting into EV production and it executes its plans. That implies that Ford stock will rise 77.83% each year on a compounded basis for the next four years.
That is a huge potential upside for investors in Ford stock today.
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This is not financial advice and you should not rely on my analysis to buy or sell any stock. I am not undertaking to induce you to buy or sell any securities.
I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.