Bad Guidance Is Just the Beginning for Ford Motor Company Stock

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F stock - Bad Guidance Is Just the Beginning for Ford Motor Company Stock

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The stock market is having a good week, but the good fortune isn’t extending to Ford Motor Company (NYSE:F). F stock is dropping big after reporting preliminary 2017 and 2018 profit numbers that were short of expectations.

Some investors were clearly surprised by the weak guidance. After all, F stock had rallied some 10% off its October lows into those numbers. That is a big move for a stock that traditionally just moves sideways. A good guide was expected. It was priced in.

But I’m not surprised by this weak guidance. The big move over the past several months is more the result of broad bullishness about the U.S. economy than anything else.

Peel back the layers of the onion, and nothing has changed about the underlying Ford growth narrative over the past several months.
It’s still the same car manufacturing giant ceding market share to rapid electric vehicle upstarts. It’s still the same company quickly losing relevance in a dynamic market with changing demands.

F stock still does nothing other than head sideways in the long-term.

What is the move here? Let Ford stock drop. It may rebound due to broad bullishness regarding the health of the U.S. economy, but it won’t be a winner.

Look for opportunities elsewhere. There are certainly better places to park your money.

Technology + Cars = More Competition

The big problem with Ford is that as the technology and automotive manufacturing markets converge, the company is staring at a whole new wave of innovative competitors.

Obviously, the first new competitor that comes to mind is Tesla Inc (NASDAQ:TSLA). The Elon Musk-led company is the leader in the electric vehicle market, which is rapidly stealing market share from the traditional vehicle market.

Granted, Ford is pivoting into making a whole new array of electric vehicles.

But so is every other traditional car manufacturer. And Tesla isn’t the only new competitor. Take a look at China-based NIO to understand the breadth and depth of this new wave of competitors.

In other words, competition in the auto market will only get stiffer. Much stiffer. Tesla (and others) will inevitably gain market share as supply ramps to meet demand, and that means that traditional car manufacturers (like Ford) will lose market share.

But there are more new entrants into this market than just Tesla.

Facebook Inc (NASDAQ:FB) once joked that they were the only company in Silicon Valley not building a car. That joke has merit. It does seem like every big tech company is building a car.

From Apple Inc. (NASDAQ:AAPL) to Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL) to all the small startups in between, everyone in Silicon Valley is making a car push because autonomous driving is inching closer to becoming a reality.

All that means is more competition for Ford. Again, Ford is making a big self-driving push, but so is everyone else. And just like Ford is way behind Tesla in the electric vehicle market, they are also far behind Google in the self-driving market.

If you connect all the dots, it’s easy to see why investors are hesitant to buy up F stock. This is a company that has maintained dominance for a long time in the somewhat stagnant automotive manufacturing market.

But that stagnant market is now rapidly changing. This change is bringing in new competitors, and because Ford has been late to adopt this change, those competitors now lead Ford where it matters most.

Bottom Line on F Stock

This hasn’t been a long-term winner for some time, and that won’t change any time soon. Competitive risks are only growing.

So long as those competitive risks continue to grow, investors will be hesitant to bid up F stock.

As of this writing, Luke Lango was long TSLA, FB, and GOOG.


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/f-stock-bad-guidance/.

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