Ford stock is down more than 50 percent year-to-date, leaving some analysts to believe the stock is grossly undervalued. But just how undervalued is it — and why? Lisa Whalen, automotive and mobility analyst for Morning Consult, breaks down the debate, the state of EV stocks, and how a potential recession could impact the industry. "It certainly was heartening to see such great sales performance from Ford, in particular, in June," she said. "Year-over-year sales outperformed the industry quite drastically, and it's a very positive indicator to see. Having said that, one month does not a trend make. So it will be interesting to watch throughout the summer."

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Ford Stock Might Be Undervalued as EV Push Continues

here with more insight on this is lisa will an automotive, excuse me, automotive and mobility analyst for morning consult lisa. What side of the debate do you fall on here? Well, in terms of undervalued stock, I would argue that many analysts think that the stock market in general is undervalued, not to mention just the automotive industry in or those who are making very strong plays toward electrification. But it certainly was heartening to see such great sales performance from ford in particular in june year over year sales outperformed the industry quite drastically. And it's it's a very positive indicator to see. Having said that one month does not a trend make. So it will be interesting to watch throughout the summer. I certainly think that's fair and I think it's great context say listen, the whole there's there's been a broader pull back that we have seen and there's been a lot of, you know throwing the baby out with the bathwater, whether it be sector related or just broadly over the entire market. I do though think back to like the end of last year before we saw the more dramatic pullback in the first half of this year? And even in the context of that, it seemed like in the greater E. V. Space that ford was still kind of undervalued. What are your thoughts there if we reflect back to, you know, the last half of last year, do you think in terms of the greater evey space that there isn't as much valuation for afford obviously, you know, compared to a Tesla, but when you're thinking in terms of market growth and the legacy automaker, the moves that it is making to grow market share? Well, we've certainly seen some popping in the speculative bubble for some of the purely electric manufacturers of Late ford is certainly putting its money where its mouth is in terms of electrification and its strategy towards that goal. It's definitely investing billions of dollars and broadening its lineup Very significantly. And that's very important because morning council data tells us that 38% of consumers say that lack of selection is a factor in considering or not considering electric vehicles. And to your point where you said, you know, we were seeing that bubble in the speculative side of the E. V. Space kind of burst. This is a conversation that again, I was having at the latter half of last year of, you know, you can make an argument for a legacy automakers and when things get tough, they have the time and duration Also, you know, the balance sheets really to be able to withstand tougher times and some of these kind of newer pure play E. V. Automakers that are just trying to get started and now what we see is kind of a downward market and where investors are pulling back in terms of investing on those kind of highly speculative growth areas. Um, let's just pivot though to the first half of this year, where we're at right now, let's talk about, why has ford stock kind of crashed the first half of this year down 50/50 percent. And do you see it rebounding off the second half kind of on some of the newer data, albeit to your point earlier one month doesn't make a trend? Well, certainly Ford is experiencing what many many companies are experiencing in terms of stock valuation in the first half of the year. But when you look at its strategy, there is a lot of issues. When you look at electrification. First of all, customers are not necessarily along for the journey. We find that only about one in five Consumers say they plan to purchase an electric vehicle even within the next five years associated with that is immense, immense investment in cost That it takes to get toward an electrification strategy. And we, when we see manufacturers making these really bold statements about being fully electorate within a couple of decades, you know, Ford saying will be 5050 in terms of electric versus traditional combustion engines, even by 2030. These are really bold statements. And the question is, are we going to be able to get the consumers along for that journey in terms of demand for such a greater supply of electric vehicles and all of that investment. Speaking of that supply, right. We look at e V sales, those are climbing. Even despite the shortages. It does seem like a key metric for for a lot of the automakers is do they have availability to take on capacity and and can people actually get their hands on a key and drive one of these cars? You know off the lot in a relatively short amount of time. Do you see ford well positioned in this E. V. Race now with context of this race kind of being in full swing for the better part of the last two years, Ford is certainly well positioned again because it's, it's worked very hard to broaden its lineup. It's worked very aggressively to really cover a very broad aspects of the vehicle industry from a product perspective. So that's really important in terms of positioning. Of course availability is is really impacting not only electric vehicles but internal combustion vehicles as well. And we've been experiencing that for several, several months. The outlook is still murky with respect to really loosening supply chain issues um, as well on the electric vehicle side, but that does provide opportunity when the manufacturers can overcome some of these global supply chain issues that again do also impact electric vehicles quite greatly. So, so that being said, There's a part of me that wonders why Ford doesn't trade closer to its Tesla. Now I know there's a gap, a huge gap in market share but you look at Tesla and you look at market cap of over $740 billion. And then I'm looking at Ford and the market cap is like $45 billion. That seems wider than even the market share gap. So why does it ford garner the momentum that is at least kind of in proportion with market share. It seems like the road towards electrification is a long play. It's a very long place when a traditional manufacturers trying to leverage its wisdom and experience and all of that muscle to get into the electric vehicle race, it's going to take time and so you know, as, as manufacturers like ford GM Toyota and the light continue to electrify their fleets will all be paying very close attention to their actions and their progress towards these goals. And that will certainly provide a lot of upside potential opportunity in terms of their valuations in the future. From an investor perspective, I do understand one point of hesitancy when you're looking at a ford is its balance sheet and how much debt the company has, what investments and decisions and strategies is forward implementing to, to pay pay down that debt. Um, you know, as it tries to kind of continue to grow and gain market share and do this pivot, you know, keeping the combustion engine side of things while pivoting over to E V. Yeah, it's been interesting the organizational change in terms of sort of splitting the organization into the traditional side, which is the electric side and certainly there may be some efficiencies and streamlining that are associated with that. It certainly makes balance sheets more transparent and clear in terms of the, the true investment that goes along with electrification. So that transparency is certainly important in terms of trying to find upside opportunities from a financial perspective, but just making changes like that, it's, it's really all in the execution at the end of the day, the bottom line is the execution, I think there is a fair enough argument and even the purpose why we're doing this segment is I've seen a lot of, you know, articles start to come out and a lot of people looking at board and saying just maybe like the broader market, it could be a little bit undervalued. So if we're saying that potentially ford is undervalued when you look at the tv sector, where do you see, you know, over value? Well, again, we've seen some popping in that speculative bubble already, you know, towards the back half of the year. And so there still remains potentially speculation again, because we don't have a good understanding of the timing and the true path towards full electrification. We do know it's taking billions and billions of dollars. There's an investment and we also know that traditional combustion engine business cases are pretty thin to begin with. So all of the investment toward vehicle electrification, um, it really does cloud the picture and we know that pricing for electric vehicles as a result is rather high compared to traditional vehicles and consumers. Um, even the consumers that are interested in electric vehicles. Many, many consumers are just not able to pay for those types of vehicles, especially in the current environment with inflation. Um, and they're like really pressing consumer pocketbooks. So a lot of factors in play here. Um, it's a very choppy scenario. It's interesting because, you know, to your point there, while inflation is, is, you know, pressuring all of us and may, you know, make us reevaluate whether we want to, you know, want to or can't afford a high ticket price item, like an electric vehicle. On the other hand, you've got gas prices and people doing an analysis that they wouldn't have done before and saying, hey, maybe long term investing in an E. V. Is the way to go again back on the flip side of this, cause it's like a teeter here. See, saw that goes up and down on the flip side of this, there's a concern that we get into a recession, even from an investor perspective growth, there's less of an appetite to invest in kind of growth at the moment with the markets, uh, pulling back as much as they have so far in the first half of this year, in terms of fear of a recession and that continuing to grow. How do you think that potentially impact the transition to electric vehicles and the growth of the industry as a whole, because that could be a huge factor for investing in a ford or any other company in this sector, recession could absolutely slow the growth of electrification. We're currently seeing consumers exiting the vehicle market in general right now just because they can't afford to buy a new or used vehicle, especially amongst very high prices and low selection. So if you're seeing so many consumers really hanging onto their existing vehicles to try to wring out extra miles and and wait it out just in terms of traditional purchases. Absolutely. It's gonna affect vehicle segments on the margins such as electric vehicles. Alright. We see if we technically some accounts, they think we're currently in a technical recession, we'll see if that ends up being the case and what the domino effect is beyond that, but really appreciate your time and great insight lisa Whalen automotive and mobility analyst from morning consult. Thanks again.