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Have you seen the new Ford F F-150 Lightning pickup truck? Since it was unveiled in May, I've been so impressed with this revolutionary vehicle that I finally decided to buy Ford shares on Wednesday.
I will list the many reasons why I'm so gaga for the new "giga threat" right after we look at the competition, in particular Tesla TSLA. But I'm not going to talk much about the Cybertruck -- mostly because I think it will become an extreme flop, by comparison to the Lightning bolt from Ford.
In the video that accompanies this article, I start by going over the valuation thesis for Tesla shares that trade at nearly 10 times sales -- while Ford trades at a measly 5% of that extreme (for a car company) price tag.
The Genius of Musk, Despite the Cyberthingy
Most of the hype over Tesla's success is backed-up by (1) high-quality, aspirational cars and (2) first-mover advantage in the EV market for environmentally-conscious consumers.
In early June, I did a brief presentation for Zacks Ultimate members where I argued that Elon Musk will go down in history as the most important entrepreneur who massively disrupted the auto and energy markets.
I would say "single-handedly" but he didn't do it without teams of the world's best engineers. And that's another one of the biggest legacies of Elon: having a great vision and finding the top talent to make it happen, just like with SpaceX technology achievements that made him a NASA partner.
In the video I also explain the lofty price targets on TSLA from strategists like Cathie Wood of ARK Invest. Her "$3,000 in 2025" thesis is based on Tesla owning the space of ride hailing/sharing with autonomous driving technologies and gross margins of 80%, where no one else will be able to compete.
The Death of Uber
Well that market is several years away, right? Actually, it's not so far away according to the updated ARK model. Here's what their top "mobility-as-a-service" analyst, Tasha Keeney, CFA, wrote in March...
"Last year, ARK estimated that in 2024 Tesla’s share price would hit $7,000 per share, or $1,400 adjusted for its five for one stock split. Based on our updated research, we now estimate that it could approach $3,000 in 2025."
That's a doubling of their 5-year price target in just the space of a year. I remember because it was January 2020 when I first noticed they bumped their target from $6K to $7K (pre-split).
Even their "bear case" calls for a 25% chance that Tesla gets to "only" $1,500 in 2025 (more than a double from the current $650). And I think this renewed exuberance now is due to the rest of the investor class discovering the ARK wisdom and assigning a higher, and sustainable, multiple to Tesla sales.
When I mentioned earlier that TSLA shares are trading for nearly 10X sales, that math is based the current market cap of $636 billion divided by next year's projected topline revenue of $66.5 billion.
While the ARK Innovation ETF ARKK owns about 3.6 million shares of TSLA (as of this writing), other larger investors who "share" Cathie's enthusiasm are Ron Baron and Baillie Gifford. And they want to own Tesla for another decade too, only selling when their outsized profits push them to reduce concentration risk.
And for clarity, I love Tesla the company and wish I owned the stock from when I said in January of 2020 that I would buy it on a pullback to $500 (pre-split, so think $100).
But I flinched during the Corona Crash. Thankfully for Zacks Ultimate members, my colleague Brian Bolan did not even blink on that fire-sale and has given his Technology Innovators subscribers a 680% open gain as of July 21.
The New F-150 Lightning: Pickup Truck Becomes Tech Platform
So why do I think the F-150 Lightning will clobber the Tesla Cybertruck? Because as much as the cyber thing is a luxury toy with low practical usage (or at least low visibility in terms of recognized practicality), the F-150 Lightning is the complete opposite.
In the tradition of the world's top selling vehicle, it's a workhorse that just got a huge upgrade of technology, features, and connected intelligence.
We're talking about 10,000-pound max towing capacity, 775 pound-feet of torque, up to 300 miles of range, zero-to-60 in 4.5 seconds, onboard electric power for your work tools and adventure toys with 11 outlets, 9.6kW of backup to "off-board" and power your house up to 3 days, and fully-connected vehicle intelligence for range, load, and charging calculations as well as mobile software updates.
And the cab has the beautiful control touchscreen like the Mustang Mach-E -- plus options to lower the gear selector lever and roll-out a big laptop workspace from the elbow rest! I've got a big fat 2015 Chevy Suburban that has no room for me to do anything near that (you're starting to see how I love this truck). Did I mention the FordPass Charging network and app?
Obviously the features and $40,000 base-price increase as one ascends into the Ford Pro levels, designed specifically with trade contractors and commercial fleets in mind. Heck if I care, I'm almost ready to buy the $40K base model with no tricks... if my wife will let me.
Back to reality, I think that the primary customers of F-150s are going to find these upgrades especially attractive. Those primary, and tough, customers are contractors and other business owners who need a reliable, stylish workhorse every day of the week. Once this group adopts the benefits of a familiar truck turned EV, they are going to be very influential on those around them.
Here's what I told my TAZR Trader members where we just bought F near $14...
This really is a killer move by Ford because if you can sell a hard-nose, no-b.s. contractor on the EV work truck, you've won a huge credible market that spills over to their friends and family. Ford is projected to grow sales 20% to $151 billion next year and so is trading UNDER 0.5 times sales at a $55 billion market cap. Meanwhile, bloated TSLA is trading at 9.5X next year's projected $66.5 billon topline. Granted that's 35% growth for Tesla, but still the valuation disparity is incredible.
The Farley EV Ecosystem Vision
Jim Farley's career in automobiles was inspired by his grandfather, who began work at Henry Ford's River Rouge Plant in 1914. Are you kidding me?!
Somehow, this might have got him a foot in the door at Ford. But before joining Ford in November 2007, Farley was group vice president and general manager of Lexus, responsible for all sales, marketing and customer satisfaction activities for Toyota's luxury brand.
Clearly they let him in the door based on this resume because the top-quality Japanese Lexus experience taught US automakers what was possible.
From 2015 to 2017, Farley was CEO and Chairman of Ford Europe and then moved up to a 2-year stint as president of Global Markets. From May 2019 to February 2020, he served as President of New Business, Technology and Strategy.
It's early in my understanding of Farley's actual contributions to the EV vision, but I am leaning toward him as just the maverick that Ford needed.
In the video that accompanies this article, I talk about why I am also a Baidu BIDU investor because they will be the leader of autonomous driving and artificial intelligence technologies in China. I bought BIDU last year under $140 and caught the surge above $300 as Cathie Wood added it to both ARKK and the ARK Autonomous Technology & Robotics ETF.
Then big tech in China got slammed as the communist leadership tries to rein in the new digital billionaire class that controls all the technology. But they are mostly picking on the powerful Alibaba and Tencent conglomerates and I think Baidu may be unfairly lumped in with them. So I'm adding shares under $180.
As Baidu diversifies away from its traditional search engine and advertising revenue model, they are not as much a threat to the CCP as Alibaba or Tencent, who thrive on personal consumer data. Baidu is becoming more of a key infrastructure asset as they deal in industrial, computational, and transportation data for their vision of intelligent cities. And the company has a running start with a distinguished AI pedigree, and strong Silicon Valley connections too, via Andrew Ng.
If Apple Built a Truck, Lightning Would Be It
What's interesting to me now is that I never would have imagined that Ford would leapfrog Tesla and Baidu in advanced vehicle technologies and platforms. Granted, Ford is not explicitly going after either autonomous driving or AI like those two (yet). But they are definitely building platform technological capabilities that could be used as the base for lots of other innovation down the road.
I said the F-150 Lightning was how a "pickup truck becomes a tech platform." Well, Ford CEO Jim Farley and his engineers have only just begun. In the video, I show some slides from their May investor presentation where they unveil their strategic plans to dominate EV markets around the globe.
They are committing $30 billion in investment to "electrify" their fleets by 2025 and seek a 40% EV product mix by 2030. The 38-slide deck also has details on the Ford connected intelligence features including Blue Oval.
But Wait... There's Argo!
I said I was planning to buy Ford shares this week and really should have pulled the trigger Monday on the plunge to $13. But I'm just as happy getting in near $14 as this news hit the PR wires on Wednesday...
Argo AI and Ford to Launch Self-Driving Vehicles on Lyft Network by End of 2021
Initial Deployments in Miami followed by Austin, Texas, to Lay Groundwork for Future Scale
DEARBORN, Mich., JULY 21, 2021 – In an industry-first collaboration, Argo AI, Lyft and Ford Motor Company are working together to commercialize autonomous ride hailing at scale. The unique collaboration brings together all of the parts necessary to create a viable autonomous ride hailing service, including the self-driving technology, vehicle fleet and transportation network needed to support a scalable business and deliver an exceptional experience for riders.
“This collaboration marks the first time all the pieces of the autonomous vehicle puzzle have come together this way,“ Lyft co-founder and CEO Logan Green said. “Each company brings the scale, knowledge and capability in their area of expertise that is necessary to make autonomous ride-hailing a business reality.”
The boss wasn't mentioned in this PR, but he's very active on Twitter if you want to see what's on his mind any day of the week. If you're on Twitter, make a point to follow Jim Farley @jimfarley98. He writes for his brief bio line...
"Mustang and racing fan. CEO @Ford. Happen to love white vans...preferably down by the river."
That unabashed sense of humor and compassion (I just found out he's related to the late, great comedian Chris Farley) translates nicely into his outlook on the competition. I'm sure you'll see who they are referencing here in the May 19 Lightning launch video...
"And it's designed to look like a truck. Because that's what it is."
Could the Cybertruck be the Ford Edsel of Innovation?
I don't know for sure. But on Tuesday, we did see Amazon CEO Jeff Bezos drive a certain truck across the tarmac to his Blue Origin launch pad. It was the smart-looking, all-electric Rivian R1S SUV. That digital cowboy is always marketing!
According to a CNBC article by Paul A. Eisenstein, "Amazon is now one of the largest investors in the automaker, with a $700 million stake. Amazon has reportedly ordered 100,000 vehicles to fill last-mile delivery and shipping needs for its Prime delivery service, with some test vehicles already on the roads and the remainder expected to hit the streets by 2030."
And there's more competition for Tesla, Ford and Rivian in an old workhorse with a new name. AMP Electric Vehicles was established in 2007 as a developmental-stage vehicle electrification company. They went public not long after as Workhorse Group WKHS.
Unfortunately, Workhorse's long journey to success just got harder with the loss of a major contract with the US Postal Service that was awarded to a division of Oshkosh instead. While they are appealing how this award was conducted, the company moves on with an 8,000-vehicle order backlog from two major customers.
As it gets more competitive out there in electric truck land, one sure thing is that the internal combustion engine is being replaced at a faster rate by climate initiatives that drive corporate fleet decisions.
My money is on Ford right now for the potential capture of two key customers: the work-truck tradesman and the mobile entrepreneur. Everything about the F-150 Lightning makes me smile and I bet I'm not alone. Did I mention the "frunk?"
Disclosure: I own shares of Ford and Baidu for the Zacks TAZR Trader.
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