Facing the Rust of Time
Investors who’ve ridden the Ford Motor Company’s stock rollercoaster for the past decade likely find themselves sitting in the back, holding on as tighter than a hairpin turn. Stuck in a sluggish gear, a $100 investment from ten years ago has merely crawled up to $128 today, dividends included. In comparison, the S&P 500 would have zoomed you ahead to $339 in the same period. And don’t even mention Tesla, which has left Ford in the dust, making millionaires
As Ford looks to pivot towards an electrified future, long-term stakeholders are wondering if this move will be the much-needed jumpstart for the iconic automaker or if it’s time to steer clear. Let’s buckle up and navigate the uncharted terrain where Ford finds itself in the next half-decade.
An Electric Odyssey Losing Its Spark
A few years back, Ford’s bull case was as simple as ABC—shedding its gas-guzzling skin to unveil a slick new visage of electric vehicles (EVs). With stalwart models like the Mustang and F-150 in tow, the company aimed to charge ahead in the EV race, leaving its competitors eating dust. Investors, too, caught the spark, seeing EVs as the holy grail for fatter profit margins, a theory backed by Tesla’s soaring operating margins since 2020.
However, the road twists unexpectedly. Despite selling a hefty 72,608 all-electric vehicles in 2023, Ford is feeling the crunch. Competition in the EV space has charged up, with even Tesla’s operating margins sputtering. Ford’s Model E division, focusing on consumer EVs, took a hit with an 84% revenue nosedive to $100 million due to plummeting sales, depicting a scene of drastic price cuts.
Image source: Getty Images.
Further accentuating Ford’s struggle, Model E hemorrhaged $132,000 for every one of the roughly 10,000 vehicles sold, plunging the segment into a projected $5 billion full-year loss by 2024. Yet, the silver lining shines dimly as Ford’s enterprise-focused EV units, notably the E-Transit vans, are pulling up the slack, expected to become a keystone of the EV business as sustainability rhetoric steers more consumers and regulators towards eco-friendly choices.
Navigating the Road Ahead
Swerving away from its once-trumpeted EV dream, Ford’s future valuation prospects don’t appear to be turbocharged by electric vehicles. Instead of a turbo boost to margins, the EV venture looks set to slam on the brakes of profitability further, leaving scant change for investors at the end of the road. The outlook remains murky heading into the next five years.
While Ford cushions the blow of its stalled stock performance with a dividend yielding 4.85%, investors seeking an income-centric avenue might do well to steer towards government bonds, offering a steadier 4.4% yield with considerably less road hazard.
To Invest or Not to Invest?
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