Why Ford Motor Company (F) Stock Is Threatened by the At-Home Economy

Advertisement

About a month ago, I came out with a piece detailing why Ford Motor Company (NYSE:F) stock isn’t getting better anytime soon. Since then, Ford investors have been victim to a bad Europe sales report, a bad U.S. sales report, an uninspiring quarterly earnings report and odd but perhaps foreboding moves by police departments to sideline their Ford Explorers fleet. All told, F stock is down more than 5% over the past month while the S&P 500 Index has rallied almost 1%.

Why Ford Motor Company (F) Stock Is Threatened by the At-Home Economy

The under-performance is nothing new. Over the past 6 months, the S&P 500 is up about 6%, while F stock is down nearly 14%.

Over the past year, the S&P 500 has rallied roughly 12%, while Ford stock has dropped 12.4%. Over the past three years, the S&P 500 is up almost 30% while the stock is down over 35%.

Unfortunately for F stock investors, the under-performance trend will continue, and may even worsen.

Here’s why.

Ford Faces Big Secular Headwinds

Despite having been one of the most recognizable brands in the world for several decades, Ford is now gradually losing relevance in the consumer landscape.

Why? Two reasons: falling car ownership rates and rising vehicle eco-friendliness. That is a deadly 1-2 punch for F stock. It’s already showing up in Ford’s numbers (U.S. sales and Europe sales are down year-over-year), and the negative effects will only get larger.

The biggest problem here is that private car ownership is far less important to Millennials than it is to their parents. Why? Well, mainly the rise in popularity of ride-sharing services like Uber and Lyft, but there is a lot more to this narrative than just that. Look at other consumer-facing services that are roaring in popularity. Postmates, GrubHub Inc (NYSE:GRUB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), Hulu and Blue Apron Holdings Inc (NYSE:APRN), just to name a few.

What do all of these services have in common? They allow customers to get everything they want delivered right to their homes. This is the at-home economy. Its here, and its not going away. Unfortunately for Ford, consumers don’t really need a car in this new way of life.

Consumers don’t go to the movies as much as they once did. Instead, they are watching Netflix, Amazon Video and Hulu from the comfort of their couches.

Consumers don’t go to malls like they used to. Instead, they are shopping on Amazon from their home computers and getting same-day delivery.

Consumers don’t go out to eat as much anymore. Instead, they are ordering from Postmates and UberEats and get food delivered to their door.

Heck, even the grocery business is under threat from online encroachment. Instead of going to the grocery store, consumers are starting to order meal kits from start-ups like Blue Apron.

And when consumers want to go to the movies, the mall, the grocery store, or out to eat, they can use Uber or Lyft. The reasons to own a car have grown increasingly small as technology has more tightly connected service providers with service consumers.

That is a rough backdrop for Ford to operate against, especially when considering that backdrop is even further muddied by a rise in awareness surrounding vehicle eco-friendliness.

Tesla Inc (NASDAQ:TSLA) and the whole electric car revolution have gained unprecedented momentum this year. TSLA stock is up nearly 70% year-to-date. Ford stock is down 11%. As I have said before, the more investors get excited about Tesla, the more they will worry about Ford. Tesla makes in-demand cars. Ford? Not so much anymore.

Bottom Line on F Stock

Ford stock hasn’t been a winner for some time. In the trailing 1-month, 3-month, 6-month, 1-year, 3-year, 5-year and 10-year windows, F stock has under-performed the S&P 500.

This trend will continue, and may even worsen considering the secular headwinds Ford faces over the next several years. The at-home economy is here and growing, and that means the number of reasons to own a car are rapidly falling. Meanwhile, the cars people will want to own in this tech-driven world aren’t really the types of cars Ford makes.

All in all, things will remain ugly for F stock. It may not get pummeled, but it sure won’t be a winner going forward.

As of this writing, Luke Lango was long AMZN and NFLX.


Article printed from InvestorPlace Media, https://investorplace.com/2017/08/ford-motor-company-f-stock-threatened/.

©2024 InvestorPlace Media, LLC