Forget EV Demand Issues. Why Ford Stock Is Still a Buy.
It’s been a tough road for Ford (NYSE:F) as the company attempts to navigate the challenging U.S. electric vehicle market. Demand for EVs hasn’t been as intense as some investors may have hoped. Nevertheless, Ford CEO Jim Farley remains optimistic and F stock is a terrific deal at its current price.
At least, the United Auto Workers (UAW) strike is over and Ford can move forward now. There will always be bumps in the road, and 2024 will be no exception to this rule, but Ford stock should still put loyal investors on the path to profits.
Look forward to a ‘Breakout Year’ With F Stock
Last year wasn’t an easy one for Ford and Farley. Nonetheless, after three years as Ford’s CEO, Farley assured, “2024 is the first year I can say we really have a chance to have a breakout year for a lot of reasons.”
What are those reasons? Farley explained, “We’re past our labor issues and negotiation in the US.” He added, “[M]ost importantly, we’re launching like six new products, and we already have a fresh new lineup of Broncos and Mavericks.”
Farley’s confident demeanor is encouraging, but there are other benefits to owning Ford stock this year. First of all, Ford is reasonably valued. Currently, Ford’s GAAP-measured trailing 12-month price-to-earnings ratio is 7.31x. That’s much lower than the already reasonable sector median P/E ratio of 17.22x.
Ford offers a 5.36% forward annual dividend yield. Both value hunters and passive-income investors should be excited to own F stock.
Don’t Fret About Ford’s EV Sales
Like I said, 2024 will be bumpy sometimes. For instance, Ford plans to shut down one of its two production shifts at a Michigan factory where the automaker assembles its F-150 Lightning electric pickups.
Ford stated that the company is doing this to match F-150 Lightning “production to customer demand.” This isn’t the first time Ford has cut its EV-production pace; last month, the automaker reduced its 2024 EV-production target.
Thus, Ford plans to transition 1,400 workers away from the company’s Rouge Electric Vehicle Center, which is where the F-150 Lightning electric pickup truck is built. Hence, at least we can say that this isn’t, technically speaking, a round of layoffs for Ford.
In any event, this isn’t the end of the road for Ford. According to a report from IEN, Ford “said it still expects continued growth in global EV sales in 2024.” However, global EV sales “will be less than anticipated.”
Ford reportedly stated that F-150 Lightning sales increased 55% in 2024, so that’s a good sign. In addition, the automaker “expects further growth” this year and is “still pushing ahead with planned launches for new EVs” in 2024.
Ford Stock: Note the Challenges but See the Value
Ford, like all U.S. automakers, will continue to face challenges this year. Demand for EVs is uncertain, but Ford and Farley remain confident.
In the final analysis, bargain hunters should buy F stock and reinvest Ford’s generous dividend distributions. Ford isn’t giving up on EVs, and similarly, value-conscious investors shouldn’t give up on Ford.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
