What’s Happening With Ford Stock?

+14.49%
Upside
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Market
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Trefis
F: Ford Motor logo
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Ford Motor

Ford stock (NYSE:F) has declined by around 17% over the last month and remains down by about 46% year-to-date, considerably underperforming the S&P 500. There are a couple of factors weighing Ford’s stock down. Firstly, the semiconductor and component supply issues following the Covid-19 reopening have hurt Ford’s overall deliveries in recent quarters, while also putting pressure on its costs. For example, over Q1 2022, Ford’s revenues were about 15% below 2019 levels. Ford has also issued recalls for around 3 million vehicles in the U.S. and Canada recently and this could also be impacting the stock. Moreover, there are macroeconomic concerns as well. With inflation surging, the Federal Reserve has been raising interest rates at a more aggressive pace and this is quite likely to put pressure on U.S. economic growth. An economic contraction typically results in weaker sales and earnings for automotive companies and this could also be putting pressure on Ford stock.

So, is Ford stock a buy at its market price of $11 per share? Now although automotive stocks could remain volatile given the possibility of a U.S. recession, we think there is a lot of margin of safety in Ford stock. Ford’s sales were already quite depressed over 2020 and 2021 (U.S. sales of around 2 million vehicles over 2021 and 2022, compared to 2.8 million in 2019) due to the semiconductor shortage, so there may not be too much downside even in an economic downturn. There are also signs that the automotive semiconductor shortage could be easing, as the demand from the tech industry cools and this could also help Ford boost supply. Moreover, Ford actually appears to be faring a bit better than its U.S. peers recently. In June, U.S. sales rose by 31.5% year-over-year with the U.S. market share expanding to 12.9 percent.  Ford’s EV transition is also progressing reasonably well, with EV sales jumping 77% percent from a year ago to 4,353 for June, with the deliveries of the F-150 Lightning pickup truck rising from about 460 units in May to roughly 1,800 units in June. Ford intends to produce over 2 million electric vehicles per year by the end of 2026, which would translate to roughly a third of its global production.

Ford’s valuation is also compelling. The stock trades at just about 5.5x consensus 2022 earnings. Ford also has a reasonably attractive dividend of about $0.40 per share, translating into a yield of over 3.5%. We value Ford stock at about $19 per share, which is about 70% ahead of the current market price. See our analysis on Ford ValuationExpensive Or Cheap for more details on what’s driving our price estimate for Ford.  For more information on Ford’s business model and revenue trends, check out our dashboard on  Ford RevenueHow Ford Makes Money.

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With inflation rising and the Fed raising interest rates, Ford has fallen 46% this year. Can it drop more? See how low can Ford stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 F Return 1% -46% -8%
 S&P 500 Return 1% -20% 71%
 Trefis Multi-Strategy Portfolio 5% -23% 208%

[1] Month-to-date and year-to-date as of 7/6/2022
[2] Cumulative total returns since the end of 2016

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