Is January 2023 a good month for buying Ford shares?

Ford Motor (NYSE: F) shares have weakened from $14.36 to $10.90 since the beginning of December 2022, and the current price stands around $11.63.

Ford reported strong third-quarter earnings results in October, but rising interest rates, a darkening macro backdrop, and higher input costs have put pressure on auto stocks again in December 2022.

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Ford will raise the price of its F-150 Lightning Pro electric truck again

Ford’s business has proven improvements throughout the third fiscal quarter, and the company reported strong earnings results in October. Total revenue has increased by 12% Y/Y to $37.2 billion, while the GAAP EPS was $0.30.

The company’s management remains optimistic about the upcoming quarters in terms of growth, and it expects cash flow over the future planning period to be more than sufficient to fund growth priorities.

Adjusted free cash flow for the full year should be between $9.5 billion and $10 billion – up from $5.5 billion to $6.5 billion on strength in the company’s automotive operations.

It is also important to note that the company’s management expects a full-year adjusted EBIT of about $11.5 billion, which is approximately 10% higher than in 2021.

Despite this, Ford Motor shares remain under pressure mainly due to the aggressive monetary policy from the U.S. Central bank, geopolitical uncertainty, and higher manufacturing costs.

Investors continue to worry that an aggressive Federal Reserve will push the economy into a deep recession that could dent corporate earnings and stock markets.

According to Deloitte Insights, there is a 45% correlation between the depth of a recession and reduced manufacturing output in the automotive industry.

Ford Motor continues to focus on speeding up electric vehicle adoption, and costs are accelerating especially quickly for those automakers investing heavily in their respective E.V. transitions.

The company already announced that it will raise the price of its F-150 Lightning Pro electric truck in 2023 amid rising component costs and persistent supply chain challenges.

The positive fact is Ford has the ability to mitigate cost pressure vs. smaller peers, and with a market capitalization of $46 billion, shares of this company are reasonably valued.

Ford trades at less than three times TTM EBITDA, and compared to Toyota Motor Corporation (NYSE: T.M.), Ford is cheaper on a price-to-sales basis.

According price-to-sales ratio (market capitalization/revenues), Ford shares are trading at 0.32, which is nearly three times lower than the price-to-sales ratio of Toyota Motor Corporation, which is trading at a P/S of 0.87.

Despite this, investors should consider that if the U.S. stock market enters a more significant correction phase, the shares of Ford could be at even lower price levels.

Technical analysis

Ford Motor shares have weakened 50% since January 13, 2022, and the risk of further decline is still not over.

The important support level stands at $10, while $14 represents the first resistance level. If the price falls below $10, it would be a “sell” signal, and we have the open way to $8 or even below.

Conversely, if the price jumps above $14, the next target could be resistance at $16.

Summary

Ford Motor shares have weakened 50% since January 13, 2022, and the risk of further decline is still not over. Rising interest rates, a darkening macro backdrop, and higher input costs continue to weigh on the automotive industry.