Ford’s Stock Is Too Expensive

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CNBC says Ford ( NYSE: F ) was among the S&P's most “overbought” stocks this week. That means the shares have risen too fast to be justified by the company’s financial fundamentals and will likely sell off soon.

Ford’s shares have done well recently. They have been up 24% in the last six months, compared to a rise of only 14% in the broader market. And the news may not justify that. It has been mixed. Management said it would convert a Canadian plant from EV manufacturing to making its Super Duty trucks. The move is an admission that Ford has gone too far in its EV investment. However, its pickups are hugely profitable. This profitable move could have been enough to move the stock.

But why the “overbought” designation? Perhaps it's because of upcoming earnings or Ford’s confusing long-term plans. The earnings will likely show steady revenue and EPS, but Ford continues to post huge losses in its EV unit.

Another nagging question is whether Ford's EV investment was made too soon, pegged as high as $30 billion. Ford has a large capacity to build EVs, which were expensive to create, and there is little evidence that the money spent was spent wisely.

Ford’s early move into EVs involved using its famous Mustang sports car brand to launch an EV crossover and its famous pickup brand F-150 to launch an EV version called Lightning. “Overbought” signals that Ford's management’s investment has exceeded its sales possibilities. The F-150 is one of the best-selling vehicles in history.

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