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Ford Motor's (NYSE:F) shares have had a rough 2020. Thanks to some out-of-character missteps, and a whole lot of concern about the outbreak of novel coronavirus, the Blue Oval's once-high-flying shares have fallen 38% since the beginning of the year.

Whenever a good company's shares hit hard times, we have to ask: Is this a buying opportunity? Let's take a look at whether it's time to buy Ford stock now.
The case for buying Ford stock
Ford has struggled in the past couple of years, as missteps in China and an aging U.S. product line have put pressure on its margins. But looking ahead, there are good reasons to be bullish about Ford and its business:
  • Strong balance sheet. Ford's debt load is modest and well-structured, and it has plenty of cash ($22.3 billion as of the end of 2019) to weather a recession without big cuts to future-product programs.
  • New products on the way. That aging product line is getting a jolt of youth that should help Ford's pricing and margins quite a bit over the next couple of years. Ford just launched all-new versions of its big-selling Explorer and Escape SUVs in 2019. An all-new Bronco (and a smaller version, called Bronco Sport) will be unveiled soon, along with a revamped Ranger pickup. Later this year, we'll see an all-new version of the F-150, Ford's biggest money-maker. More, including products in new categories, will follow over the next year or two.
  • China is turning around. A new management team -- and a new strategy -- are moving things in the right direction after several quarters of losses. It'll take some time, but Ford appears to have a solid plan to make its China operation sustainably profitable.
  • Future-tech investments will start paying off. Ford has several electric vehicles coming, including the Mustang Mach-E sports SUV and electric versions of two of its fleet stalwarts, the F-150 pickup and the Transit van. All are designed to be profitable in the near term, which will help pay back the hefty investments that Ford has made in the technology.
Long story short, there are several efforts in motion that should not only fix what has ailed the company, but should also boost Ford's bottom line and margins substantially over the next few years. That's the nutshell bull case for the stock.
But what's the the case for the stock right now?

The case for buying Ford stock right now
There are two things that make Ford's stock especially interesting right now:
  • It's cheap. Ford is trading at just 6.5 times its anticipated 2020 earnings. That's low: we'd normally expect a healthy automaker to be trading around 10 times earnings.
  • It pays a great dividend. As I write this on Friday morning, Ford's dividend yield is a whopping 10.2%, thanks to the fact that its stock price has been clobbered recently. Often, a big dividend yield is a caution sign for investors, because it could be cut. But Ford has long promised that it will try to maintain its dividend through a recession, as long as its cash reserve holds out.
The case against Ford stock right now
Of course, there are also some reasons not to buy Ford stock right now, or at least to think carefully before doing so.
Recession risk
It seems very likely that the U.S. economy is now (or shortly will be) in a recession, as Americans hunker down at home to wait out the COVID-19 pandemic. Auto sales are likely to fall dramatically for at least a few months: We already know that new-car sales in China fell about 80% in February, when the Chinese government instituted strict quarantine measures.
If there's a recession, even a short one, Ford's sales and profits will fall, and its stock price will probably fall further as well. The risk here isn't that Ford will perish -- it'll be fine in the long run -- but that you might get the stock cheaper by waiting.
Management risk
Ford's current CEO, Jim Hackett, has received mixed reviews. On the one hand, he's a visionary, with a strong sense of how Ford should best position itself as new technologies transform the industry. On the other hand, he has been criticized for not communicating his vision well to employees, stakeholders, and investors.
The good news is that Hackett appears to have delegated day-to-day management to Ford's new chief operating officer, veteran Jim Farley. Farley probably has what it takes to get Ford where it needs to go -- but he still has to prove it to investors.

Should you buy Ford stock now?
I think you could certainly do worse than to buy Ford stock right now, but I also think that you might do better if you wait. If the coronavirus outbreak pushes the U.S. economy into recession, as seems likely, you will almost certainly have the opportunity to buy it at a better price in a month or two.
That said, I own Ford stock and have no plans to sell. If you already own Ford stock, I suggest hanging on to it. If you sit tight and reinvest that fat dividend through whatever economic storms lie ahead, you'll probably be pretty happy with the results when auto sales (and auto stocks) start to recover.


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I just bought a bunch at $4.90. It was as low as $4.75 earlier today -- a great time to buy.
 

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Discussion Starter #5
Yikes. That really sucks. I know some folks who only buy stock for the dividends... so if those are cancelled... why own it?
 

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Wouldn't that have been nice to know!

Back up to $4.40. Still a good buy.
 

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i bought the stock because in the long run it will be worth more. Dividends will return, they are Just suspended. this crisis shall pass and the world will keep spinning.
 

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My $4.00 buy order hit today just before this announcement sent prices back up:
Trump Allows Ford, General Motors, Tesla to Make Ventilators
 

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Morgan Stanley: Ford will survive coronavirus halt, but stock may not have bottomed yet

They also think car sales will be strong in the Fall:

Despite these setbacks, Jonas said there is much to look forward to for automakers that survive the next three months, citing the “unprecedented stimulus” of economic aid that will include direct payments to most Americans.

“You’re going to sell a boatload of cars later this year, and your stocks won’t just recover, they’ll multiply,” Jonas said.
 

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But today:
Ford Debt Deemed Junk as Coronavirus Pandemic Slams Auto Industry
Bonds issued by Ford have been cut to junk by S&P Global Ratings as the coronavirus pandemic hits the already suffering 117-year-old carmaker.
 

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Anyone think that recent rally could be the only bottom we see or could it get worse?

ford-stock-price.JPG


This doesn't give me much hope "GM and Ford reported huge (and growing) losses in Q4 2019, before the economic crisis began. Both companies have suspended 2020 guidance and have drawn down $15B+ on credit lines. Are we witnessing a slow motion implosion/bankruptcy for America's two largest automakers? It looks like it. Reuters reports, both companies are planning to make 320,000 EVs for North America in 2026 (combined!) ... that would be less than Tesla did in 2019. This is super disappointing, and makes their chance of a turnaround look even lower."
 

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Anyone think that recent rally could be the only bottom we see or could it get worse?

View attachment 1136

This doesn't give me much hope "GM and Ford reported huge (and growing) losses in Q4 2019, before the economic crisis began. Both companies have suspended 2020 guidance and have drawn down $15B+ on credit lines. Are we witnessing a slow motion implosion/bankruptcy for America's two largest automakers? It looks like it. Reuters reports, both companies are planning to make 320,000 EVs for North America in 2026 (combined!) ... that would be less than Tesla did in 2019. This is super disappointing, and makes their chance of a turnaround look even lower."
Obviously the bet for most stocks is how quickly the economy can start getting back to normal. If that is several months, we probably have not seen the bottom. If longer, you may not have to worry much about stocks for a long time. Food and medical care will be your main concern.
 
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