It was a little over a month ago when we asked, “Can Ford (NYSE:F) keep the recovery going for the rest of 2020?” At the time, it was a question worth asking, as Ford shares found themselves in an extended rally going back to March, when the worst of the coronavirus disaster struck. The latest news out of Ford suggests that the answer, at least so far, is “yes,” as the company recently revealed that the latest quarter boasted big new sales to China, again.
The Chinese Increasingly Like Ford
Hours ago, Ford noted that, in the period from July to September, sales within China were up 25% over the same time last year. The company sold 164,352 vehicles within the country, which, given the average price of a new Ford, represents gross sales in the 10-figure range. Ford gave the credit for such impressive sales, and impressive sales growth, to a slate of new product launches as well as a strategy that focused very specifically on the Chinese people's tastes and perceptions, commonly called localization.
The news was enough to give Ford an extra 1.31% gain on its share price in pre-market trading, and also represents the start of what may be an exciting new growth pattern for the company. This is actually the second quarter running that the company's sales have seen growth in the region, breaking a three-year streak of falling sales in China.
The Chinese Don't Just Increasingly Like Ford
As good of news as that was for the company, it may not be just a matter of Ford's marketing in China. There seems to be a general pattern of upward growth for American car purchases in China, as General Motors (NYSE:GM) noted that its sales in the same period were up 12%. Slower gains than Ford, but also slower gains over a much larger base; that extra 12% in sales meant GM sold 771,400 vehicles in the region, around four times what Ford sold.
What's more, there was a clear pattern of growth for auto sales in general in China; in July, vehicle sales overall were up 16%, a pattern that carried on through the quarter as sales increased 12% in August, and another 13% in September.
So as much as Ford might like to take credit for pulling itself up by its collective bootstraps, it seems that the gains were just as much a matter of a rising tide lifting all boats as much as it was Ford knocking its marketing out of the park.
Let's Not Short-Sell the Marketing, Though
While Ford certainly benefited from a general upward trend in car sales, particularly in China, there has to be something said for Ford's product line. For instance, the Ford Explorer—a mainstay of Ford's product line that has been seeing declining sales since 2019—rolled out two new trim versions known as the Timberline and the King Ranch. Reports suggest that the 2021 version will come packed with bells and whistles, starting with leather interior and carrying on through heated seats throughout and a sound system from audio wizards Bang & Olufsen.
This is before we even consider the electric vehicles, though at last report, Ford's product testing wasn't doing so well. Battery fires were reportedly plaguing the new model line, a point that will hurt Ford's marketing going forward unless it can demonstrate reliability effectively. However, there are excellent signs around the Ford Bronco, as we've noted previously, that should help.
While the analysts are increasingly coming around—in the last 30 days, Ford went from having three “sell” ratings, 10 “hold” and five “buy” to having three “sell”, eight “hold” and six “buy” ratings based on our latest research—and price targets are trending upward again in a steady pattern from $7.82 90 days ago to $8.16 today, there's reason to be skeptical of Ford. Battery fires in the electric vehicle line when electric vehicles are increasingly popular items don't help.
However, there's also plenty of reason to like Ford. A lot of people do already, rather, Ford consumers do. Just ask the growing numbers of Chinese folks who are slipping behind the wheel of a new Ford, or try asking the same question of other countries. Just ask Benchmark, who upgraded Ford from a “hold” to a “buy” just four days ago. Ask Deutsche Bank Aktiengesellschaft and Goldman Sachs, who both upgraded their price targets a full dollar each in the last week.
Ford took a beating back in March; almost every stock on the market did. Most recovered, at least somewhat. Now, we're looking ahead, and Ford increasingly looks like a stock to have in your portfolio as it made the return from the crevasse of coronavirus sell-offs to a future that looks increasingly bright.
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