Ford stock (NYSE: F) has been trading at around $10 per share, significantly lower than the levels seen in January 2022, before the inflation shock hit. The stock is currently down by 10% from June 2022 levels, while the S&P 500 has gained close to 52% during the same period. Ford has faced challenges due to supply chain issues, the semiconductor shortage, high interest rates, and weak consumer confidence. In Q2 2024, Ford’s sales grew by 6% year-over-year to $47.8 billion, driven by a new lineup of vehicles, but the adjusted earnings fell short of estimates.
Despite the recent struggles, Ford stock has seen gains of 10% since early January 2021, with returns fluctuating over the years. The stock outperformed the S&P 500 in 2021, underperformed in 2022 and 2023. In comparison, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 consistently over the same period. Ford’s future performance in the uncertain macroeconomic environment remains uncertain, with potential challenges in consumer demand and lower pricing affecting returns in the near term.
There are potential tailwinds for Ford stock, including strong demand for trucks and SUVs, which are Ford’s strengths. The slowing growth in the EV market could give Ford more time to capitalize on gas-based vehicles while investing in long-term EV developments. Ford’s current valuation is attractive, trading at about 5x free cash flow for 2024. However, macroeconomic concerns such as U.S. jobs data below expectations and fears of a recession could impact the stock. Analysts estimate Ford’s valuation to be around $14 per share, about 40% above the market price.
Looking back at the 2022 inflation shock and the 2007-08 financial crisis, Ford stock has faced challenges and significant declines in value during turbulent market conditions. The company has shown resilience and recovery post-crisis, with revenues rebounding strongly in recent years. Ford’s financial position appears healthy, with sufficient cash reserves to meet its obligations through the ongoing inflation shock. As the Fed works to control inflation and market sentiment improves, there is potential for Ford stock to see gains if fears of a recession are alleviated.
In conclusion, while Ford stock has faced challenges in recent years, there is potential for growth and gains if market conditions improve. The company’s focus on high-end vehicles and pickup trucks, along with its strong financial position, could help drive future performance. With uncertainties in the macroeconomic environment and potential headwinds in automotive demand, investors should carefully monitor Ford’s performance in the coming months.
