Ford Motor (NYSE:F) and Ford stock enters 2021 where it entered 2020, in the stock market’s doghouse.
Shares opened at about $8.90, 35 cents below where they started last year. That’s a market cap of $35 billion for a company that, even during the pandemic, probably had sales of $130 billion and only a small loss.
The market cap is less than the cash it had on the books in September, which was almost $45 billion.
Ford makes electric cars, and its F-150 pickup is still among America’s most popular models. But investors are shunning the stock in favor of electric start-ups like Workhorse Group (NASDAQ:WKHS), Lordstown Motors (NASDAQ:RIDE) and even Fisker (NYSE:FSR).
Nio (NYSE:NIO), the Chinese luxury electric start-up with just 5% of Ford’s revenue, has more than twice its market cap.
Either Ford is dying or it’s the biggest bargain on the planet.
Should Someone Buy Ford?
Having given up on Ford’s own management, analysts are urging other companies to buy Ford and take it out of their misery.
Here’s a Fool who says Tesla (NASDAQ:TSLA) should buy it. With Tesla valued at nearly $670 billion, it could be had for seat cushion money.
Or what about Apple (NASDAQ:AAPL)? It wants to make cars. Ford makes cars. Ford should make Apple cars. It would cost less, even with Ford’s $107 billion in debt, than trying to build a car company from scratch.
But would it? That debt, and Ford’s pension obligations, mean the enterprise cost of Ford would be well north of $150 billion. The whole point of the electric and autonomous “revolution” is that vehicles like the F-150 go away. Thanks to a ramp-up in production and the renewed pandemic’s surge, a lot of these trucks are now sitting in parking lots.
These factors, along with Ford’s union contracts, act as poison pills that have, so far, dissuaded all buyers from doing more than kicking the tires.
Ford Rising?
But the pandemic will end, the pickups will sell, and as our Mark Hake noted last month, Ford should make about $1 per share this year. That’s well over its old 15-cent-per-share dividend, which he thinks could be restored.
If Ford is going to come back, in other words, Ford will do it. Momentum looks favorable. CEO Jim Farley, who took over in October, is a former Toyota (NYSE:TM) executive who has been with Ford since 2007. He has promised to speed up the transition started by predecessor Jim Hackett.
This means more cars like the Mustang Mach-E, competing with the Tesla Model Y. Ford has also launched new hybrid cars this year with prices starting at $28,000. For 2022 Ford will electrify its delivery trucks and the F-150.
While rivals will be starting from the ground up, Ford already knows how to scale production of cars and trucks. Electrics are also easier to make, with fewer moving parts and should last longer. If Ford can get to the market, its total sales shouldn’t take a hit. Analysts are estimating sales of $150 billion in 2022, with a small profit.
The Bottom Line on Ford Stock
With its enormous fixed-costs and late start, Ford right now is as speculative as any electric start-up.
But Ford knows how to make and sell cars. It will have a friend in the White House. It has a plan for the transition to electrics and self-driving cars. If it can execute on that plan, if it can make money this year, it might be worth Apple’s money next year.
That’s as good an automotive market speculation as any.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/. As of this writing he owned shares in AAPL.
