Buying Ford shares might be a good idea in October

Buying Ford shares might be a good idea in October
Written by:
Stanko Iliev
6th October, 21:17
Updated: 7th October, 01:43
  • Ford reported a holding of 13.06M shares in Velodyne Lidar
  • Ford sales in the U.S fell only 4.9% in Q3 to 551,976 vehicles
  • Wall Street is „bullish“ on Ford and this stock could be a good "buy" opportunity

Ford shares have advanced above $7.20 at the beginning of October and the current price stands around $7. The technical picture implies that the price may advance above $8 this October but there are also some obvious risks when it comes to buying Ford (NYSE: F) shares.

Fundamental analysis: Sales in the U.S fell only 4.9% in Q3

The next several months will be competitive for the global auto industry but even with the COVID-19 pandemic, the sale of Ford cars is going well. Ford sales in the U.S fell only 4.9% in Q3 to 551,976 vehicles which is above expectations.

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Truck sales rose 0.6% to 311,751 units while SUV sales were down 0.7% to 191,803 units. The negative news is that the car sales plunged 37.5% to 48,424 units in Q3 but despite the challenging pandemic environment, Ford had its best third quarter of pickup truck sales since 2005.

According to the latest news, Ford reported a holding of 13.06M shares in Velodyne Lidar, an autonomous-driving company specializing in-vehicle sensors. The company also unveiled plans to build the electric F-150 EV that is designed for hard-working customers that need a truck to do a job.

Ford is confident about the electric F-150, this will certainly add new customers and increase the revenues of the company. Shares of Ford could be a good investment option and most financial analysts are also expecting its price to rise considerably in the next several years.

If we compare total stockholders’ equity of $30.85B and the market capitalization of $28B, we can notice that this stock is not overvalued and maybe now could be a good time to buy Ford shares. Another useful information for potential investors is that this company has paid more than $7B dividends to its shareholders in the last three years and this number can be even bigger in the future.

Some estimates say that the auto market is expected to grow only slightly in the next several years but the Ford Company will be one of the major players. If you decide to trade Ford (NYSE: F) shares you should have in mind that there are several negative facts that are connected with this company.

Ford recently recalled more than 700K vehicles in North America as rearview cameras show distorted images due to poor electrical connection. The company is targeting to eliminate 1,400 U.S. salaried jobs by year and some rumors say that the company could face problems with cash flow.

Despite this, the company is preparing for a safe and staged return to normal operations and the revenue will probably raise in the future.

Technical Analysis: The price of the stock could advance above $8 this October

In my opinion, this stock has a very good risk/reward ratio and investors in Ford stand to gain a lot more for taking a comparatively smaller risk. On this chart, I marked current resistance and support levels.

Data source: tradingview.com

The current supports levels are $6.5 and $6, $8 and $9 represent the current resistance levels. If the price jumps above $8 it would be a “buy” signal and we have the open way to $9.

Rising above $9 supports the continuation of the bullish trend and the next price target could be located around $10. If the price falls in the upcoming period, every price in a range from $5- $6 could be a very good opportunity to invest in Ford shares.

Summary

Shares of Ford could be a good investment option in October but you should have in mind that there are also some obvious risks. Concerns about sluggish economic growth amid the ongoing pandemic continue to dominate the financial markets. Ford recall recently more than 700K vehicles in North America and the company is targeting to eliminate 1,400 U.S. salaried jobs.

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