Talking Numbers

Ford’s mysterious ride

Ford's mysterious ride

Gas prices are at multiyear lows. Unemployment is falling. And auto sales are strong. So why are shares of Ford and General Motors in the gutter?

In the past three months, shares of GM and Ford have fallen a respective 8 and 18 percent, despite a plethora of what appears to be positive news.

The answer could be found on the other side of either ocean.

(Read: Drivers in long-term relationships with their cars)

"It's a strong recovery here in the United States," said Chad Morganlander, portfolio manager at Stifel Nicolaus' Washington Crossing Advisors. "But when you look overseas at China and emerging markets, there is a rapid deceleration. Also within the eurozone, GDP growth is less than 1 percent. For Ford or General Motors, that's a real troubling sign."

While Ford and GM are domestic automakers, about 40 percent of their sales come from abroad. While slowing global growth is weighing on their shares now, both Ford and GM could find themselves the beneficiary of a global economic turnaround – should one materialize.

"Global growth will grow roughly around 3.3 percent," he said. "So earnings and revenue growth will be there."

Morganlander has a price target of $22 per share on Ford, a whopping 57 percent higher than where it was trading on Wednesday. That's because he expects 2015 earnings to grow to $1.70 per share while the multiple climbs a few multiples above its current nine times earnings.

"We do believe that Ford is undervalued," he said. "You'll see a turnaround in 2015."

(Read: Tesla earnings: 2 cents per share, vs. expected loss of 1 cent)

However, the technicals on Ford are not as optimistic as Morganlander, according to the chart work of Steven Pytlar, chief equity strategist at Prime Executions.

He sees the stock as having formed a double top during the second half of 2014. A double top formation is a bearish pattern because it can often signal an exhaustion of buyers. With Ford shares unable to break above the $18 level, the stock broke below its critical neckline support at $15.

"Unfortunately, even if we are going to see a turnaround in 2015, it's not yet being reflected in the technical indicators," Pytlarsaid. "We see very little interest on the upside. Lots of selling pressure remains as we are below that support level–even though the broader market has rallied over the back half of October."

That has Pytlar wary of Ford's stock. "On a technical basis, we would have to say that means we're cautious," he added, "and would stay away in the near term."

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