Stock of the Day

July 19, 2023

Ford Motor (F)

$10.18
+$0.08 (+0.8%)
Market Cap: $40.46B

About Ford Motor

Ford Motor Company develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. It operates through Ford Blue, Ford Model e, and Ford Pro; Ford Next; and Ford Credit segments. The company sells Ford and Lincoln vehicles, service parts, and accessories through distributors and dealers, as well as through dealerships to commercial fleet customers, daily rental car companies, and governments. It also engages in vehicle-related financing and leasing activities to and through automotive dealers. In addition, the company provides retail installment sale contracts for new and used vehicles; and direct financing leases for new vehicles to retail and commercial customers, such as leasing companies, government entities, daily rental companies, and fleet customers. Further, it offers wholesale loans to dealers to finance the purchase of vehicle inventory; and loans to dealers to finance working capital and enhance dealership facilities, purchase dealership real estate, and other dealer vehicle programs. The company was incorporated in 1903 and is based in Dearborn, Michigan.

Ford Motor Bull Case

Here are some ways that investors could benefit from investing in Ford Motor:

  • The current stock price is around $10.37, which may present a buying opportunity for investors looking for value in the automotive sector.
  • Ford Motor reported a quarterly earnings per share (EPS) of $0.14, exceeding expectations, indicating strong financial performance and potential for growth.
  • The company has a solid market capitalization of approximately $41.24 billion, suggesting stability and a significant presence in the automotive industry.
  • Ford Motor has declared a quarterly dividend of $0.15, translating to an annualized yield of 5.79%, which can provide a steady income stream for investors.
  • The company has a return on equity of 16.88%, reflecting effective management and the ability to generate profits from shareholders' equity.

Ford Motor Bear Case

Investors should be bearish about investing in Ford Motor for these reasons:

  • Four investment analysts have rated the stock with a sell rating, indicating a lack of confidence in the stock's future performance.
  • The company experienced a year-over-year revenue decline of 6.2%, which may raise concerns about its growth trajectory and market demand.
  • Ford Motor has a high debt-to-equity ratio of 2.31, suggesting that the company relies heavily on debt financing, which can be risky in volatile markets.
  • The stock has a price-to-earnings (P/E) ratio of 7.10, which, while low, may indicate that the market has priced in potential challenges ahead.
  • Analysts have set an average price target of $10.03, which is slightly below the current stock price, suggesting limited upside potential in the near term.

EV Mixed Signals: Sales Are Rising, But Inventory Slower To Move

Written By Kate Stalter on 7/10/2023

Electric car recharging with charge cable and plug leading to charge point

Sales of electric vehicles are continuing to grow, but at a slower pace, according to Cox Automotive, which provides marketing and financing services to the auto industry.

The EV industry is certainly sending some mixed messages. Ford Motor Co. (NYSE: F) said on July 6 that second-quarter sales were higher, driven by increases in its F-series of pickup trucks.

However, sales declined by 2.8% as supplies of the electric Mustang Mach-E were short.

Inventory Slower To Roll Out Of Lots

So while Ford is saying its premier EV was in short supply, Cox was saying dealers overall were seeing inventory moving off the lots at a slower pace. 

Ford’s also said sales of its electric pickup, the F-150 Lightning, rose 118.7% year-over-year. However, some analysts pointed out that because the vehicle is so new to the market, having been available since May 2022, it’s not a surprise to see such rapid growth. 

Sales of the Mustang Mach-E, saw sales fall 21.1% from last year’s second quarter. That follows a drop of 20% in the first quarter. A Ford spokesman told EV trade publication Elektrek that the company expects inventory flow to improve at the end of the second quarter. 

Ford said last year that it was making upgrades to its plant in Mexico, which produces the Mach-E. It warned that those upgrades would result in production slowdowns. 

Ford reports its second quarter on July 27, after the closing bell. 

Meanwhile, at an industry event, an economist from Cox Automotive revealed that dealer inventory of EVs was rising faster than sales, while traditional internal-combustion engine cars were moving off lots faster.

Cost & Charging Stations Among Roadblocks

Certainly, there are roadblocks to a quicker pace of EV adoption, the main challenges being EVs’ cost and the availability of charging stations. While the EV industry works hard to promote lower operational costs over time, the harsh reality is: Consumers have to shell out more upfront to buy an EV. In a paycheck-to-paycheck world, that makes a big difference. 

Cox’s data show a 342% increase in weekly EV dealer inventory over the year-ago quarter. At the same time, manufacturers are rolling out new EV models at a fast clip. 

As you might guess, Tesla Inc. (NASDAQ: TSLA) remains the EV sales leader, with a U.S. market share of about 60%. Its revenue growth decelerated in the past two quarters, but the company has been slashing prices to move more product. 

Earlier this month, Tesla said that in the second quarter, it delivered a record 466,140 vehicles, ahead of analysts’ expectations. 

Tesla is due to report full second-quarter results after the market’s close on July 19. 

More EVs Being Registered

EV industry publications say publicly available data show that 7.1% of vehicles registered in January 2023 were all-electric. That’s a 74% year-over-year increase.

Another development could be worrisome for the EV industry, which is investing in EV technologies to the tune of hundreds of millions of dollars. Online automotive search engine iSeeCars found that EV and plug-in hybrid sales are dropping on the West Coast, the area that’s driven the adoption of electrification. 

Much of the hurry to roll out EVs is driven by the federal government and in some cases, state governments. For example, in April, the federal Environmental Protection Agency floated a rule that after model year 2027, about two-thirds of new cars would have to be electric. 

Government Targets Too Aggressive?

However, according to reports, the auto industry, despite its enthusiasm and heavy investment in EVs, is letting the federal government know that this, and other targets, may be overly aggressive. The auto industry is concerned about the realities of supplying batteries for cars, as well as infrastructure concerns and the willingness of consumers to make the shift so quickly. 

While the EV supply chain is stabilizing and readying itself for the inevitable time when EVs overtake internal-combustion engines in sales, there’s clearly a gap right now between reality and expectations.

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