Why is Ford Stock (Still) So Cheap?

Say goodbye to sedans and hello to “personal bullet trains.”

Andrew Willis 2 June, 2023 | 8:28AM
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Andrew Willis: For two months now, Ford (F) stock has been stuck in a rut of worries from investors about rising electric vehicle expenditures. But we’re also seeing big developments in terms of both growth and profitability.

Ford isn’t focused on ‘being all things to all people’ anymore, notes sector strategist David Whiston. Ford’s trading in sedans for a more exciting lineup, from Broncos to F-150s and Mustangs – and significant cost savings through common platforms.

To appease investors in the short term, Ford recently issued a special dividend, but I wouldn’t bet on that continuing. Meanwhile, Ford also mentioned it had sold billions in stock of EV pickup truck maker, Rivian. This could have helped with the dividend but is more something for growth investors in the long term as it shows confidence in their own offerings like F150 Lightning or the upcoming ‘T3’ EV pickup trucks. There are also new models to look forward to like a 7-seater EV SUV that CEO Jim Farley likened to a “personal bullet train,” – which indeed might not be for ‘all people,’ but at least exciting for most.

For Morningstar, I’m Andrew Willis. 

bulls Bulls Say

  • Ford's turnaround will take lots of time due to many restructuring projects around the world, but so far, the international business seems to be getting better.
  • Ford is focusing its investments where it gets the best return, which is why mostly exiting North American car segments and production in South America is the right move, in our opinion.
  • Ford has tried to remove some administrative layers, and we like CEO Farley's aggressive moves into electric vehicles, something the company was slow to do in the past.

bears Bears Say

  • The auto industry is very cyclical, and until recently, Detroit automakers had been losing significant U.S. market share to foreign automakers for years.
  • Long-term profitability could be hindered by unions, which traditionally have wanted their share of the pie. The nonunionized import automakers in the U.S. do not have this problem.
  • Ford's stock can sell off heavily on macroeconomic fears, even if the company itself is doing well. Furthermore, it takes significant investment to fund growth in the auto industry, which limits potential margin expansion.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Ford Motor Co9.69 USD-2.81Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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