With its popular models like the F-150, Mustang, and Explorer, Ford (F 1.69%) needs no introduction. This business has been around for over a century, and it's one of the world's largest car manufacturers today.
But this automotive stock hasn't been the biggest winner for investors. Shares have returned 26% in the past decade, a figure that includes dividends. For comparison's sake, the S&P 500 would've grown your capital by 240%.
As we focus our attention on the present situation and what the future might hold, is Ford stock a buy now?
Looking at the latest numbers
Ford blew past Wall Street estimates for the fourth quarter of 2023. Revenue increased by 2% to $46 billion. For the full year, sales jumped 11%. All of the company's segments -- including its legacy autos, electric vehicles (EVs), and the pro division -- reported growth in 2023 versus the year before. Management even announced a special one-time dividend of $0.18 per share.
While its adjusted earnings before interest and taxes (EBIT) margin dipped in 2023, Ford has identified where it can cut costsby $2 billion, with the expectation that the company's expenses in 2024 will be in line with last year.
Executives provided upbeat profitability guidance. They believe Ford will generate adjusted EBIT of $10 billion to $12 billion this year, the midpointof which would be higher than the $10.4 billion reported in each of the past couple years.
The financial update was well received by investors: Shares jumped 6% in after-hours trading.
Zooming out
Ford might be firing on all cylinders right now, at least according to its leadership team, but I think investors need to focus on some more important factors that matter over the long term. By doing so, it's easy to conclude that this won't be a winning stock over the next several years.
There are several reasons why I don't believe this is a good business.
From an industry perspective, there is a ridiculous amount of competition in the auto manufacturing space. Ford not only has to continue battling it out with other legacy car companies like GM, Stellantis, Toyota Motor, Honda Motor, and Volkswagen, among others, but there are also many EV makers vying for position as the industry shifts to a more sustainable future. This backdrop has and will continue to make it difficult for Ford to stand out from the crowd, attract customers, and grow sales.
And like its peers, Ford is unduly exposed to numerous factors that are outside of its control. Macroeconomic forces -- such as changes in interest rates and gas prices -- can have a profound impact on the auto industry by influencing consumers' propensity to buy new vehicles.
Supply chain issues, which have been at the forefront in recent years, can also negatively affect Ford's production capacity and input costs. Furthermore, there are ongoing labor disputes, which could become a problem again in a few years because the current United Auto Workers contract is set to expire in 2028. Again, the company has minimal control over any of this, which adds risk.
A closer look at the financials makes it incredibly clear that there is much to be desired. In the past decade, Ford's revenue growth has averaged a subpar 1.8% per year. U.S. GDP increased at a compound annual rate of 4.6% between 2012 and 2022. Investors shouldn't want to own a company that is expanding at a slower clip than the overall economy.
And going back to the nature of the industry, Ford can't escape how capital-intensive auto manufacturing is. There will always be the need to spend heavily on capital expenditures, with profit margins remaining in the single digits. But Ford has no choice but to play this game, unless it wants to lose to rivals.
The result is that these poor fundamental characteristics will likely lead to weak investment returns over the long term.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool recommends General Motors and Stellantis and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
FAQs
Investors who are attempting to beat the market over the long term should avoid buying Ford stock. This poor track record speaks for itself. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla.
Is Ford stock a good buy right now? ›
The highest analyst price target is $21.00 ,the lowest forecast is $9.75. The average price target represents 16.49% Increase from the current price of $12.43. Ford Motor's analyst rating consensus is a Hold. This is based on the ratings of 13 Wall Streets Analysts.
Is Ford stock a good buy in 2024? ›
Wall Street consensus analyst estimates call for company revenue to rise by 5.8% in 2024. So, there is healthy demand that's forecasted on the horizon. Add this to the $2 billion in cost cuts that executives have planned, and it's understandable for shareholders to be optimistic.
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The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies.
Is Ford stock overvalued or undervalued? ›
Over the past 52 weeks, F's P/CF has been as high as 11.02 and as low as 3.10, with a median of 4.61. These figures are just a handful of the metrics value investors tend to look at, but they help show that Ford Motor is likely being undervalued right now.
Could Ford stock hit $100? ›
To be fair, it wouldn't be prudent to expect Ford to reach $100 anytime soon, and even Toyota Motors (TM) - which is the most valuable legacy automaker - has a market cap below $300 billion. Another analogy, however, could be the comparison with Tesla (TSLA), which currently has a market cap of around $700 billion.
How high is Ford stock predicted to go? ›
Stock Price Forecast
The 13 analysts with 12-month price forecasts for Ford Motor Company stock have an average target of 14.18, with a low estimate of 10 and a high estimate of 20. The average target predicts an increase of 14.54% from the current stock price of 12.38.
Is Ford paying a special dividend in 2024? ›
Ford Motor Co (NYSE:F) recently announced a dividend of $0.15 per share, payable on 2024-03-01, with the ex-dividend date set for 2024-02-15. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates.
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Full-Year 2024 Outlook
The company now expects to generate adjusted free cash flow of $6.5 billion to $7.5 billion – up from the initial outlook of $6 billion to $7 billion provided earlier this year.
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal.
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Ford Motor Company - Hold
Valuation metrics show that Ford Motor Company may be undervalued. Its Value Score of A indicates it would be a good pick for value investors. The financial health and growth prospects of F, demonstrate its potential to outperform the market. It currently has a Growth Score of D.
Should I buy or sell Ford stock? ›
Is Ford Motor stock a Buy, Sell or Hold? Ford Motor stock has received a consensus rating of buy. The average rating score is and is based on 26 buy ratings, 22 hold ratings, and 6 sell ratings.
Why should I invest in Ford? ›
Strong dividend
Ford declared a first-quarter regular dividend of $0.15 per share, making its forward yield almost 5%. It gets better, though. Ford also announced a supplemental dividend of $0.18 per share -- a cherry on top for investors.
Should I buy Ford or GM stock? ›
So, Which Is the Better Investment, General Motors Co or Ford Motor Co Stock? Overall, General Motors Co stock has a Growth Score of 62, Momentum Score of 79 and Quality Score of 63. Ford Motor Co stock has a Growth Score of 62, Momentum Score of 56 and Quality Score of 39.
Is Ford a penny stock? ›
Key Takeaways. Many of today's large, well-known corporations once traded as penny stocks, and some still have had quite low stock prices. A few examples of ex-penny stocks are Ford Motor Company and General Motors, Sirius XM Radio, and Blackberry.
Is Ford a good dividend stock? ›
Ford Motor Dividend
Ford Motor is a dividend paying company with a current yield of 6.24% that is well covered by earnings. Next payment date is on 3rd June, 2024 with an ex-dividend date of 7th May, 2024.
