Insights

Ford Stock Is on Sale Right Now — I’m Getting Ready to Buy

Incorporated in 1903, Ford (NYSE: F) is sometimes viewed as a legacy business — the type of company your great-grandfather might have invested in. Fast-forward to the 2020s, and it’s challenging to convince younger traders of Ford’s value proposition during a time of vehicle electrification, persistently high inflation, and shortages of supplies and workers.

And it’s increasingly difficult to convert jittery investors into Ford fans after a severe share-price slide. The bulls and bears both have financial and operational data points to cherry-pick, and frankly, Ford just isn’t as “sexy” as unabashed disruptors like Tesla and Lucid.

Yet, Ford shouldn’t be dismissed as a dinosaur as the company is actually making significant inroads in its pivot to clean-energy vehicles. Besides, stock-price drawdowns can lead to prime value-buying opportunities — and there’s a terrific value in this surprisingly modern American automotive icon right now.

Stalling out

Is Ford stock truly “on sale”? The share price did come down from $25.87 in January to $11 and change in May, and 50%-plus discounts don’t come around every day. A skeptical view, however, might be that Ford stock didn’t deserve to trade at $25 in the first place.

Maybe the early 2022 bull run was overdone, but Ford’s trailing 12-month price-earnings (P/E) ratio is eye-catchingly low at just under four. Plus, Ford pays a forward annual dividend yield of 3.56%, so already the stock is starting to sound like a perfect Warren Buffett–style holding (even though Ford stock isn’t actually part of Berkshire Hathaway‘s portfolio).

As a point of comparison, Tesla’s P/E ratio is 88, and Lucid doesn’t have a P/E ratio because it’s not a profitable business; moreover, neither of those automakers pays a dividend. So from an old-school valuation-and-yield perspective, Ford is looking pretty good at the moment.

The Rivian problem

Given the slump in Ford stock, one might be tempted to assume that the company’s been a chronic underperformer lately. Granted, one of Ford’s investments hasn’t been a winner, but overall the company’s results have been respectable.

In 2022’s first quarter, Ford’s $34.5 billion in revenue was in line with Wall Street’s expectations, while the company’s quarterly earnings per share (EPS) of $0.38 slightly beat analysts’ estimate of around $0.37. However, Ford’s bottom-line results were better during the year-earlier quarter — a time when Ford’s stake in Rivian Automotive (NASDAQ: RIVN) probably seemed like a surefire winner.

Fast forward to May 2022, and Ford sold 15 million Rivian shares after they had lost significant value. Ford sustained a $5.4 billion mark-to-market loss on its Rivian investment during 2022’s first quarter, so excluding that, Ford’s quarterly performance would have been much better than the published figures suggest.

An electrifying shift

Beyond the rock-bottom valuation multiple and the generous dividend payments, investors should be on board with the electric vehicle movement if they’re going to buy Ford stock with confidence. Long gone are the days when Ford relied on gas-guzzling, internal-combustion-engine vehicles as its bread and butter; today, this old company is evolving faster than you might expect.

Ford’s big shift to vehicle electrification is happening on more than one continent. Earlier this year, Ford introduced its E-Transit and E-Transit Custom all-electric vans in Europe, with a “commitment to reach zero emissions for all Ford vehicle sales in Europe and carbon neutrality across its European footprint by 2035.” Meanwhile, back in its home country, Ford commenced full production of its electric F-150 Lightning trucks with with a starting price below $40,000.

In the month of May, Ford’s pivot to electric vehicles was on full display as the automaker’s total U.S. truck and SUV sales declined slightly year over year, but Ford’s U.S. electric vehicle sales jumped 221.5%. This represents a growth rate that’s “almost four times the rate of the industry,” according to Andrew Frick, vice president of sales, distribution & trucks, Ford Blue.

If any catalyst can drive Ford stock back above $20, it’s the company’s unmistakable commitment to vehicle electrification. So go ahead and pick your reason for favoring Ford — value, dividends, or the company’s multiregional electric-vehicle push. At the current price point, buying Ford stock should put you in the driver’s seat.

David Moadel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares) and Tesla. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Free Share Allocation Reward Levels

STARTER

Class
$ 2,500 Deposit & Trade
  • REWARD^
  • 1 x Marathon Oil Corporation (NYSE:MRO)

ECONOMY

Basic
$ 5,000 Deposit & Trade
  • REWARD^
  • 1 x Pfizer Inc (NASDAQ:PFE)

ECONOMY

Standard
$ 10,000 Deposit & Trade
  • REWARD^
  • 1 x Amazon.com Inc (NASDAQ:AMZN)

ECONOMY

Plus
$ 25,000 Deposit & Trade
  • REWARD^
  • 2 x Apple Inc (NASDAQ:AAPL)
POPULAR

BUSINESS

Class
$ 50,000 Deposit & Trade
  • REWARD^
  • 4 x Apple Inc (NASDAQ:AAPL)

FIRST

Class
$ 150,000 Deposit & Trade
  • REWARD CHOICES^
  • 12 x Apple Inc (NASDAQ:AAPL)
  • 2 x Tesla (NASDAQ:TSLA)
^Please refer to the Free Share Promotion Terms and Conditions for details.

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info