Ford Stock (NYSE:F)
Ford stock is gaining favor again among investors after plunging yesterday on news that the automaker warned supply chain difficulties will hurt third-quarter performance. Ford stock rose by as much as 3.7% on Wednesday on expectations that the company’s severe problems will be short-lived.
What’s the Reason?
The auto industry has struggled for some time because of a lack of suitable parts. The typical modern automobile contains around 1,200 microchips and almost 30,000 individual components. Vehicle manufacturing will suffer in an environment where supply chains are stressed and specific industries, notable semiconductors, cannot meet consumer demand.
Ford released a number on Tuesday that reflected the cost of dealing with these issues. Tens of thousands of automobiles, the company stated, will be waiting for essential parts on company lots by the end of the quarter. Outcomes are being eroded by inflation as well. Ford has reduced its profitability projection for the quarter because it expects supply costs to be around $1 billion higher than expected.
But Ford stock is sticking to its full-year guidance, as was mentioned yesterday. This suggests management views the problem as temporary and expects to make up for lost sales in the fourth quarter. Several investors seem to have taken those words to heart on Wednesday, as they have been buying back at the reduced price.
Ford Motor Company (NYSE:F) and other established automakers are in the midst of a transition period during which they are maintaining their businesses related to conventional gasoline-powered vehicles while simultaneously initiating the shift to electric vehicles for the long term. So far, Ford stock appears to have handled the shift successfully, with high praise and more orders than the firm can fulfill for its F-150 Lightning and Mustang Mach-E electric vehicles.
Ford stock still has its job cut out for it to compete with Tesla and other electric vehicle upstarts, but this long-term change and not one supply-constrained quarter will define whether or not this company is worth purchasing.
Due to the earnings warning, Ford stock is now cheaper than it was 48 hours ago. On Wednesday, investors are purchasing shares in the company with the expectation that Ford Motor Company (NYSE:F) will continue on its current path to success despite the setback.
Featured Image- Megapixl @ Oleschwander