Over the last year, shares of Ford Motor Company (NYSE:F) stock have fallen more than 16% even as the broader market chugged almost 5% higher. This week, some are touting the growth prospects of Ford stock in the wake of the company’s latest press push around self-driving cars.
More specifically, Ford announced the acquisition of Israeli startup SAIPS, which focuses on computer vision and machine learning.
Ford says the startup is one of four that will help it deliver high-volume, fully autonomous vehicles by 2021. SAIPS, for one, is expected to contribute to the artificial intelligence and image and video processing these cars will need to understand the environments they’re driving through.
Can Ford Stock Keep Up?
This sounds great, but it’s anything but the basis for a bet on growth out of Ford stock right now. Self-driving cars are the darling of both the automotive world and the tech world right now; meaning, Ford has to work on its play in order to stay relevant. But because we’re in such early stages, there are too many question marks to bet on a winner.
Ford’s vague language about self-driving cars transforming society is a mirror image of the predictions and timeline that Tesla Motors Inc (NASDAQ:TSLA) has been shouting from the rooftops for some time.
While Ford stock is indeed a better value, and you at least get a nearly 5% dividend as you wait for this bet to pay off, the stock has been sinking for good reason. Sales of regular vehicles have been slow, and while self-driving cars sound nice, they’re years away from driving anywhere near Ford’s bottom line.
Ford not only has to adhere to its timeline, but will also have to make a car strong enough to steal a significant share of the marketplace. While this acquisition is one piece of evidence that Ford is taking steps in that direction, there is plenty of competition out there looking to steal the same slices of this new market.
Once again, because self-driving cars are at the crossroads of the tech world and the auto world, big-name players from both are in the race. That adds even more question marks about Ford’s status vs. its competitors.
For the cherry on top, self-driving cars also come with countless question marks related to legislation. For starters, most people saw the news of the first death to take place in a self-driving car and most people have heard stories about things going wrong with Google’s test vehicles. And it was only recently that self-driving cars even considered legal drivers!
There will be plenty more battles and debates about self-driving cars themselves, and more specifically about the legislation behind them.
Bottom Line on F Stock
With this in mind, investors eyeing Ford stock for its 2021 timeline must be careful not to put the cart before the horse. There could undoubtedly be some long-term growth potential here, but many pieces must fall into play before I’d recommend actually throwing your money at it.
We need more tangible signs of progress and technological advances than an idealistic video, an acquisition and a press push.
Until then, keeping assessing Ford stock for the business model it already has behind it. And as always, be wary of a stock boasting an outsized yield when shares have been moving in the wrong direction.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
