Shares of Ford Motor Co. lost more than 8% this week after the company lowered profit forecast for this year, and announced major leadership changes in a bid to accelerate the turnaround. The stock now trades at the lowest levels since December 2018.
Fundamental analysis: Changes made to please skeptical investors
Ford announced that it has named the strategy chief Jim Farley as the new chief operating officer (COO). This way, Farley has established himself as a defacto No.2 in the company, behind the CEO Jim Hackett. Farley will now be in charge of all global operations.
Moreover, Joe Hinrichs, President of Ford, will retire after 19 years with the company. This news has raised many eyebrows in the car industry given Hinrichs’ expertise in car manufacturing. However, CEO Hackett insists that Farley is the right man for the job.
“Jim Farley is the right person to take on this important new role. Jim’s passion for great vehicles and his intense drive for results are well known. He has also developed into a transformational leader with the imagination and foresight to help lead Ford into the future,” said Hackett.
Analysts believe that Hackett installed Farley as the new No.2 to accelerate Ford’s turnaround by finding a better and faster way to get to the autonomous and electric future profitably.
“We put a lot of new cost and capability in these new vehicles. We have to get a lot quicker in taking advantage of them. We do not have two or three years to figure out how we use connectivity in the F-150 and our new electric architecture that we launch later this year,” said Farley.
Earlier this week, Ford disappointed investors with a lower profit guidance for 2020. Moreover, the fourth-quarter adjusted operating income fell by 67% from a year ago on higher costs. Earnings were reported at $1.19 a share, down from $1.30 a year ago.
Technical analysis: Stock hits 13-month low
Ford stock price dropped on the lower profit guidance earlier this week, just to extend the fall on Thursday after the company announced management shake-ups. The stock now threatens to move below the $8 mark for the first time since December 2018.
As seen in the chart below, the price action had been trading in a clear downtrend since the summer of 2014. As a result, the Ford stock price lost more than 50% in less than six years. A break of the ascending trend line now opens the door for more losses.
The key support is located at $7.41, which is the lowest printed price in the last 11 years. This area may attract some buying interest given its historical importance.
Given that investors have been selling Ford stock for years now, it is hard to imagine a quick turnaround, especially bearing in mind Tesla’s recent performance. The stock is now approaching the 11-year low where the bulls may look to buy the Ford stock hoping for a rebound.