Sing with me, InvestorPlace fans: “Have you driven a Foooooorrrrrrrrrrd lately?” Remember that 1984 jingle? ’Twas once upon an internal-combustion time the most recognizable ditty in the auto industry. But for many investors, the 2020 answer to that musical question would be “Nope,” as Ford (NYSE:F) and its Ford stock have seen better days.
Or make that, better decades.
Tracing back from the recent share price of $8.25, Ford stock is down 18% since 2010; 69% since since 2000 – and 4% since 1988, when “cell phone” meant a call you made from jail after driving under the influence. On its face, this more than makes the case that Ford belongs to the industry sector known as bow wow wow.
But before we call off the dogs, let’s consider the pro-Ford slant that can’t be dismissed outright. Having survived the federal auto industry bailouts of 2008 to 2014; still poised to embrace the electric vehicle revolution; and having won the hearts of pickup drivers with the F-150 (still number one in sales after 40-plus years), the House of Henry could well be a sleeper – and Ford stock that overlooked underdog on your portfolio’s racing team.
Ford Stock and the Analyst Impasse
Given that Ford is an American legacy company that helped create the auto industry, analysts can provide a clear-eyed picture that keeps us focused on the present, though only to a point. (Read on to see what I mean.) Unfortunately, they’ve put Ford stock in park. The consensus hold is decisive – 12 out of 18 analysts weigh in with that rating – and overall enthusiasm for a buy, while picking up over the last month, doesn’t amount to a tidal wave at five analysts.
Meanwhile, the average price target of Ford stock has all the sex appeal of an Edsel. It stands at $8.69, which would amount to a 5% jump. Excuse me while I stifle a yawn.
But should yours truly wake up? In the scheme of things, 5% might not be all that bad when you consider that every investor needs a bulwark, a company so planted among market heavyweights that it provides a port in a storm. Ah, but as we’ve established, Ford stock hasn’t rewarded investors for some time now – unless you count sitting there in the driveway as a good strategy. Nor has its quarterly dividend of 15 cents per share risen since 2015.
And so we must turn to the future to see where Ford could surprise us all with some revolutionary planning and appealing products.
Ford Goes Electric and Wins
Those products, as it turns out, are already here. On Nov. 10, Green Car Journal named Ford’s new Mustang Mach-E its 2021 Car of the Year, beating out the Mini Cooper SE, and Volkswagen ID.4. For Ford stock, the timing couldn’t be better and as marketing focus goes, Ford’s decision to build on a beloved Baby Boomer classic with forward-thinking EV tech hits the bullseye. A boost to Ford stock? By all rights, it should be.
Now this isn’t an automotive trade pub and I’m no car expert (unless you count puttering around in a 2009 Corolla with all its body plates falling off). But here are some eye-catching specs worthy of a Ford stock rally: 300 miles of range, 459 horsepower and 0 to 60 in between 3 to 4 seconds. Did I mention this is an electric car? Man, is it electric. It’s as sporty looking as any Mustang you’ve ever seen. Quick, someone write a sequel to “Mustang Sally” now!
Meanwhile, Green Car Journal also tapped a hybrid F-150 as its Truck of the Year. Again, this is exactly where Ford must position itself: building on beloved brands, not resting on its laurels. EVs are here to stay and Ford is doing it right – especially when compared to competitor General Motors (NYSE:GM), which has made the dumb (but likely face-saving) decision to keep working with disgraced EV maker Nikola (NASDAQ:NKLA), currently accused of running a massive fraud scheme.
Outrunning Negative Investor Bias
So what’s the rub with Ford stock? Especially when Ford has beaten the street by a mile in its last two quarterly reports? Well, it could be this: Investors have been known to punish Ford because of its reputation – unfair, I would contend – as a Big Three dinosaur stuck in the 1980s, devoid of great ideas and about as energized as a worn spark plug.
Well, we all need to grow up and take an unflinching look at where Ford is today, in late 2020. Negative investor irrationality and bias, if they hold for the next several quarters, would amount to a feat of fickle mass ignorance. I mean, come on. (If it helps, Jay Leno was a celebrity judge in choosing the Green Car Journal awards.)
Some automakers that fail to find profit for years and years find themselves propped up by irrational exuberance. Others pay the price because they lack flashy CEOs and a Silicon Valley pedigree. Ford stock deserves a chance and yes, Ford’s award-winning scores in the EV sector speak of greater things ahead. The F-150 is evolving when it doesn’t have to and the EV Mustang is beautiful, clean and fast as lightning.
Let’s hope skeptical investors stuck in Ford’s past can catch up.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.