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After CES, How Will Ford Respond at the Detroit Auto Show?

Bret Kenwell

On Sunday, the Detroit Auto Show will kick off for the press before opening to the public later this month. This draws in all sorts of companies, with obvious names like Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM) and Fiat Chrysler Automobiles NV (NYSE:FCAU). It also draws in some unlikely names like Intel Corporation (NASDAQ:INTC) (thanks to its Mobileye acquisition) and Nvidia Corporation (NASDAQ:NVDA). With all that said, we want to take a closer look at what this means for Ford stock.

In fact, Ford will be under a pretty big microscope this coming weekend. Investors are concerned about its future. Tech companies like Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) are working on self-driving systems with Waymo, and the Consumer Electronics Show in Las Vegas this past week really highlighted autonomous driving.

Even General Motors is gearing up to develop a fleet of autonomous taxis. These fleets can generate hundreds of thousands of dollars per car, vastly outpacing the record average transaction price of $38,000 the automaker recently achieved.

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Countless automakers and tech companies are all striving toward the same goal: autonomous driving. Arguably Tesla Inc (NASDAQ:TSLA) kicked off the race. Or at least, it brought the most attention to it. Now it’s everybody’s hot word. The concern is, where does Ford fit in with all this?

That’s what we’re hoping to see from the Detroit Auto Show this week. Where does Ford (be it with Intel or on its own) fit into the autonomous future? Will it lead the way or trail the pack? Will sales suffer as a result or will they remain steady? Even if sales are steady, will GM rapidly become the automaker stock of choice because of its fleet of autonomous taxis?

While that’s a lot of questions, we’re looking for a lot of answers. Hopefully, the company gives investors some reassurance and confidence and its direction.

Enough About the Future

What about the right now? Specifically, at the Detroit Auto Show, we’ll want to see some of Ford’s new lineup. Considering how well pick-up truck sales have been, this will be a key area for Ford. The company’s F-150 truck remains the bellwether of the trucking industry. Boosting its miles per gallon via a new diesel engine option will certainly turn some heads.

But that’s not the only truck we’re looking at. Don’t forget about the smaller, previously discontinued Ranger. The smaller truck is a fan favorite for some. Smaller and more nimble than a full-size truck, but capable of small- and medium-size jobs. Many find the Ranger as a nice compliment to an F-150.

What else are we watching? We want to see the 2018 Ford Mustang. Will we get to see a Mustang Shelby GT500 and the highly likely Mustang Bullitt? If we do, it may not be a huge needle-mover for Ford. But it will help it stack up against Dodge and Chevrolet’s sports car offerings. Plus, when enthusiasts and bloggers start throwing around inflated horsepower numbers, zippy 0-60 times and gorgeous pictures, it generates a positive buzz.

In a nutshell, we want to see some of Ford’s flagship models and what improvements have been made. Further, we want to see what the company is working on in the self-driving car department.

Trading Ford Stock

With all that set, how does the stock price stack up?

Trading at just 8.1 times forward earnings estimates, Ford stock is far from expensive. However, the valuation for stocks like GM and F have rarely been a good reason to buy the stock. It might be a good explanation for holding onto the stock and collecting F’s 4.6% dividend yield.

But buying Ford stock on the expectation it will rally due to be being undervalued will only lead to disappointment. It’s always had a low valuation.

chart of Ford stock

With that said, Ford stock is beginning to perk up a bit. After testing $10.50-ish several times over the summer, F found some mojo. In October, it broke out over its multi-year downtrend line. In hindsight, that was the buying opportunity we were looking for, particularly when it pulled back a few weeks later and found support at that prior downtrend line (shown on chart).

So what now? Having missed the breakout trade, waiting for a pullback may be the more prudent move. While I’ve long preferred GM stock, investors can consider buying Ford stock between $12.25 and $12.50. It should get some support near this area, along with the 50-day moving average (in blue).

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.

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