Ford ( F ) and General Motors ( GM ) — which, along with Stellantis ( STLA ), make up the once-impressive Detroit “Big 3” — haven’t created wealth for investors over the years, and if anything, have destroyed wealth. Ford and General Motors’ underperformance isn’t limited to 2023, with both stocks in the red, despite the S&P 500 Index ($SPX) gaining double digits. Instead, it is a longer-term phenomenon.
GM stock, for example, continues to trade below its 2010 IPO price of $33. Moreover, the “new GM” listed that year, after bankruptcy the previous year. Ford did no better; since listing in 1956, the stock has risen at a CAGR of less than 4%. Even if we add the dividends, the return will follow what the S&P 500 Index has delivered over the years – let alone the stellar return that Tesla ( TSLA ) has delivered since its 2010 IPO.
Ford Stock Tried Investors’ Patience
Ford stock peaked at about $36 in 1999, and currently trades at less than a third of those levels. The shares have lost more than 39% in the last 10 years, and 21% in the last 20 years. Ford has had a few good years in between, with shares reaching $20 in late 2021 for the first time in two decades amid optimism about its electric vehicle (EV) pivot and CEO Jim Farley’s transformation plan.
However, the stock fell in 2022, and continued its dismal run in 2023 – even as US EV market leader Tesla surged, and is among the top 10 S&P 500 gainers for the year.
So, will 2024 finally be a good year for Ford – and will investors’ patience pay off? Let’s take a look.
Ford Stock 2024 Forecast
Wall Street analysts are slightly optimistic about Ford’s stock in 2024, and it has been given a consensus rating of “Moderate Buy.” Of the 14 analysts covering F stock, 6 rate it a “Strong Buy” while 2 more call it a “Moderate Buy”. Four analysts rate it a “Hold”, while the remaining 2 say it is a “Strong Sell”. Ford’s average target price of $14.42 is about 35% higher than current levels.
Adam Jonas, an analyst at Morgan Stanley who is bullish on Ford shares, believes that 2024 will be a critical year for the US auto industry that could determine its “long-term relevance.” He listed one particularly interesting data point – while the average S&P 500 company spends the equivalent of its market cap on capital and R&D in 50 years, Ford did so in 2.6 years, while General Motors needed only 1.9 years.
To be sure, the American auto industry is going through a major upheaval. While automakers have invested billions in their EV production plants, demand hasn’t taken off as expected, and they’ve had to readjust their production plans in the midst of the inventory build-up. Ford has also scaled back its ambitious EV plans and delayed further investments as it adjusts production levels to better match underlying demand to avoid a further build-up of EV inventories.
Here’s Why F Stock Looks Like a Good Buy for 2024
All this said, I believe 2024 could be rewarding for Ford investors. This is why.
- Ford’s Diversified Portfolio: While demand for EVs has lagged behind supply growth, Ford has the advantage of a diversified portfolio that includes both ICEs (internal combustion engines) and hybrids. As EV sales have moved to the slow lane, the company has doubled down on hybrids — and that strategy could pay off. Hybrid demand has been quite good, as the product appeals to that set of buyers who are wary of battery electric cars for reasons ranging from a high initial purchase price to range anxiety.
- Ford’s Earnings Power: While Ford estimates the United Auto Workers (UAW) contract will add between $850-$900 per car assembled, the company should be able to offset that somewhat through price increases and cost cuts. During the Q3 2023 earnings call, Farley emphasized that the company is “nowhere near peak profitability” – contrary to what many analysts seem to believe. The company is generating near-record profits, and analysts expect its net profits in 2024 to be only about 7% lower than in 2023.
- Ford’s Valuation Multiples Are Quite Attractive: Ford trades at a trailing 12-month (NTM) price-to-earnings (PE) multiple of 6.8x, and in absolute terms, its market cap is just over $41 billion. The valuation multiples look quite attractive, with the forward dividend yield of 5.8% being the cherry on top.
Overall – unless we enter a major recession or the macros weaken significantly in 2024 – Ford could have a much better run in 2024, and reward the patience long-term investors have shown the stock.
At the date of publication, Mohit Oberoi held a position in: F , GM . All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.