Ford (Ticker Symbol: F) announced on Monday that the company would be continuing with its restructuring plan and is going to cut around 7,000 jobs, which is over 10% of its global workforce. The automaking giant said it was going to cut 900 jobs starting this week, 500 of which will be in the U.S. The majority of the job cuts are coming from overseas but roughly 2,300 will happen domestically. This is all part of a restructuring plan that will save the company upwards of $600 million annually.
Last week, the Trump administration announced that it was planning on delaying auto tariffs for up to six months. This will help alleviate some of the financial pressures Ford has been enduring due to the repercussions of ongoing trade conflicts. Trump is using the tariffs on auto goods as a way to gain leverage during trade negotiations with China and the European Union, at the expense of Ford, General Motors, and other automobile makers.
Above is a long term chart of Ford’s stock. The stock enjoyed the fruits of the dot com bubble, trading to an all-time high of $37.41 on April 19, 1999. Ford’s stock topped shortly after, forming a bearish divergence pattern, as indicated on the chart above by the red arrows, where the stock makes a higher high in price but the Relative Strength Index makes a lower high. The stock proceeded to sell off for over a decade, pulling back over 90%. Ford’s stock made what some investors are calling a generational low of $1.01 on November 20th, 2008, during the Great Recession.
Fords stock found support when the then-Chairman of the Federal Reserve, Ben Bernanke, announced the beginning of the Federal Reserve’s quantitative easing policy, which would continue for almost a decade. The stock did, however, find life again and broke above its ten-year long downtrend in the third quarter of 2019, to rally over 2000%, finding resistance around the $20.00 price level. Over the past two decades, Ford’s stock has been forming a massive Head and Shoulders Pattern. Currently, the stock is finding resistance at the 100-week Moving Average. If a trade deal with China were to happen, traders should keep their eyes out on the Head and Shoulders Neckline around $20.00 for a possible breakout to the upside.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 10 analysts offering 12-month price targets, the average price target for Ford’s stock is $11.06. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $10.28.
Ford’s layoff plan is part of a large scale restructuring plan to help the company salvage hundreds of millions of dollars in a time when the company very much needs the income. The company also announced that, of the layoffs, 20% of them were going to be upper-level management positions. Ford’s stock performance has not been the greatest over the past 20 years but it has survived through times of hardship and continues to maintain a very loyal investor base. Investors in Ford should look to their next earnings release on July 24th for fresh news on the company.