It seems like all the hype surrounding Tesla (NASDAQ:TSLA) and Nikola (NASDAQ:NKLA) has diverted attention from heritage automakers such as Ford (NYSE:F). And due to this, my issue is that dealers will lose out on a prime chance in F stock together with the July 30 second-quarter earnings release.
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As I’m writing this, F stock is investing in just $7 — and today, it’s only below that mark. The bull’s thesis is the stock was already been penalized by the novel-coronavirus catastrophe. The fear along with loathing have already been priced in, and also the stock is due to a rally.
But, rebounds typically don’t only happen without some kind of catalyst. Nevertheless, the forthcoming earnings occasion may be that catalyst. When it’s an earnings blowout, then maybe the trading area will take its eyes from Tesla and Nikola for some time and give Ford the interest it warrants.
A Closer Look in F Stock
There seems to be some significance attached to the $7 degree in regards to F stock. Before the pandemic, the magic number was $10. And today, $7 has magnetic power.
Not to be a conspiracy theorist, but I guess the options market may be involved here. Options traders are proven to “pin” stock costs to some number so as to attain what they predict “max pain.” And by transferring the stock price into a specific dollar figure in alternatives expiration, they could extract as much cash as possible from retail-level choices buyers.
That may sound crazy, but notice how F stock temporarily reached $7 at early June, just to get fast rejected. It’s a cruel market occasionally, rife with head-fakes and hurried dreams.
Could an earnings surprise galvanize traders to bidding F stock over the $7 pain point? Nobody knows for certain, but low expectations may work wonders in placing stocks up for unforeseen consequences.
Beware the “Obvious”
If folks start saying that something in the markets is “obvious,” that’s frequently your cue to wager on the other side of the transaction. History has revealed “obvious” results to be incorrect in several cases, for example Brexit along with also the 2016 presidential election.
Therefore, when Morningstar analyst David Whiston announced that “Expectations are obviously extremely low…” concerning the American automotive sector, which have really been a fantastic sign.
Sure, Whiston’s concerns aren’t anything we haven’t heard before. Yes, debt is a variable worth considering. However, like most financial analysts, Whiston is too busy awaiting efficiently reflect on Ford’s second quarter:
“Ultimately what I want to know is how much of the debt can they pay off by year-end?… What’s the capital structure going to look at the end of the year?”
Aim Low for Best Outcomes
Going against the analyst consensus is a bold move that’s not suggested for the majority of investors. If done properly and following a lot of due diligence, however, it may be an extremely rewarding and satisfying manifestation of staunch contrarianism.
For the next quarter, the analysts expect Ford to record an operating loss exceeding $5 billion. They’re also nominated to get a per-share earnings reduction of $1.30, that can be fairly steep for a $7 stock.
But wait, it gets worse: they’re also throwing a 59.85% year-over-year decline in annual earnings. That’s exactly what I’d call pessimism in its finest.
Meanwhile, it’s public information which during the next quarter of 2020, Ford published its greatest retail share in five decades. The F-Series, Ranger and Explorer were especially strong in this aspect.
Therefore if the analysts are front-loading a hugely disappointing prognosis for F stock, then I’m more than pleased to advocate a long standing. To some bona fide contrarian, that’s the “obvious” response.
The Main Point on F Stock
F stock could be immobilized to $7 to now, but that can’t last forever.
If anything needs to function as a breakout catalyst, allow it to become an earnings blowout — that, purposely or not, could just be aided by the most pessimistic analysts.
David Moadel has provided persuasive content – and spanned the occasional lineup – on behalf of Crush that the Street, Economy Realist, TalkMarkets, Finom Group, Fintech Zoom, also (obviously ) InvestorPlace.com. In addition, he functions as the chief analyst and market writer for Portfolio Wealth Global and hosts the most popular financial YouTube station taking a look at the Markets. For this writing, David Moadel failed to maintain a position in any of the above securities.