What happened
Ford (F 0.66%) stock was off to a rough start in April; it tumbled 9% this week through 3 p.m. ET Friday, according to data provided by S&P Global Market Intelligence. So far this month, Ford has already given investors several reasons for being worried.
So what
The ongoing supply crunch in the automotive industry isn't anything new, but even a legacy automaker like Ford has been struggling to navigate the challenges for several quarters now. Unfortunately for investors, Ford confirmed the supply woes are far from over when it suspended production at its Flat Rock assembly plant in Michigan this week, citing a shortage of semiconductor chips. This isn't the first time Ford had to shut this plant because of supply issues.
Just a few days ago, Ford said it will recall 737,000 vehicles, including versions of the Ford Escape SUV and Bronco Sports SUV, to fix oil leaks.
Image source: Ford.
All eyes, though, were on Ford's March sales numbers, which came out on April 4. Ford failed to impress the market, and the stock tanked after the report came out. Ford's total sales in March dropped 25.6%, with truck sales tumbling 34.4% and SUV sales declining 9.4% year over year.
Analyst Brian Johnson from Barclays was quick to downgrade Ford's stock rating and slashed its price target to $17 a share from $23 per share, according to TheFly.com. Johnson pointed out several risks in the auto industry, including inflation and interest-rate hikes, and cited Ford's vulnerability to the chip shortage in particular as a reason behind the stock's downgrade.
Now what
The sharp sales drop in Ford's March sales reflects the severity of the supply crunch and demonstrates that investors are not wrong to feel nervous about the stock.
However, there was also a silver lining in Ford's March sales report that you simply can't afford to ignore. Its total electric vehicle (EV) sales surged 16.9% year over year last month, and its EV sales surged 37.9% in the first quarter of this year.
Also, Ford's problem is entirely on the supply side and not the demand side. Ford's retail orders for all vehicles (total ordered excluding fleets) hit a record in March with dealers taking orders for 88,000 vehicles, up 33% year over year. Its F-Series alone bagged 50,000 orders in the month.
In fact, Ford's total truck sales grew 12.5% sequentially in March, with the new Maverick posting its best one-month sales since it was introduced, surging 115% sequentially.
Given those numbers, Ford's stock price shouldn't have dropped as much this week. It seems to be a classic case of the market simply reacting to headlines without digging deeper to see the full picture.
