Is Ford stock a buy after recalling more than 850,000 vehicles?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 16, 2021
  • Ford shares pulled back 2.86% on Friday after news the automaker recalled more than 850,000 vehicles.
  • The company is recalling about 775,000 2013-2017 Ford Explorers due to a cross-axis ball joint defect.
  • It also recalled 35,000 2020-2021 Ford F-350 Trucks and 41,000 2020-2021 Lincoln Aviator SUVs.

Ford Motor Co. (NYSE:F) shares pulled back 2.86% on Friday after the company recalled more than 850,000 vehicles due to various defects. The stock price is now down nearly 15% since peaking on 3rd June amid continuing concerns about chip supply. 

Friday’s announcement added to the automobile industry’s current issues that had started to fade in May. However, the pullback could present an attractive opportunity to invest in one of the automobile industry’s most exciting stocks amid plans to transition to electric vehicles. Ford has already made progress towards EVs based on recent reports selling more than 10,000 EVs in May.

Is Ford a buy in July 2021?

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Ford stock’s recent pullback has pushed the price down, creating a compelling opportunity to invest. 

Ford shares now trade at an attractive P/E ratio of 14.19. Moreover, analysts expect the company’s EPS to grow by 175% this year and a further 54.98% next year, resulting in a compelling forward P/E ratio of just 7.90. 

Ford’s earnings will also grow at an average of about 53% in each of the next five years, resulting in a PEG ratio of just 0.27. Therefore, Ford is a high-growth stock that is also significantly undervalued based on its current P/E ratios.

Source – TradingView

Technical overview: Ford stock price prediction for Q3 2021

Although Ford’s stock price is yet to hit oversold conditions in the 14-day RSI, the recent decline presents an attractive opportunity to buy. In addition, the F share price is also closer to the 100-day moving average, creating another opportunity for a rebound. 

Therefore, investors can target rebound profits at approximately $14.72 or higher at $16.19. The key support levels are $12.66 and $11.31.

Bottom line: the catalyst for buying Ford shares now

Ford stock seems to enjoy solid support from the 100-day moving average. The price has not fallen below the moving average indicator for over a year now, making it highly reliable. 

Furthermore, the company’s current valuation multiples are exciting for a growth stock. Therefore, it may be best to buy before the rebound sends F stock skyrocketing.

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