Ford Stock 2024 Outlook: A Potential Turnaround on the Horizon?

Ford Stock

Ford (NYSE:F) and General Motors (NYSE:GM), integral players in the Detroit “Big 3” alongside Stellantis (NYSE:STLA), have struggled to generate returns for investors over the years, witnessing a prolonged underperformance that extends beyond the challenges of 2023. Both stocks are red despite the S&P 500 Index ($SPX) posting double-digit gains.

GM’s stock, still below its 2010 IPO price of $33, reflects a challenging trajectory since its 2010 relisting post-bankruptcy. Ford’s performance hasn’t fared much better, with shares experiencing a modest Compound Annual Growth Rate (CAGR) of under 4% since its 1956 listing. Even factoring in dividends, these returns fall short of the S&P 500’s performance, let alone competing with the remarkable gains seen by Tesla (NASDAQ:TSLA) since its 2010 IPO.

Testing investors’ patience, Ford’s stock, once peaking at around $36 in 1999, now trades at less than a third of those levels. The shares have witnessed a decline of over 39% in the last decade and 21% in the last two decades. While 2021 saw a glimmer of hope with shares hitting $20 amid optimism over the company’s electric vehicle (EV) pivot and CEO Jim Farley’s transformation plan, the stock faced setbacks in 2022 and continued its lackluster performance in 2023.

Amid Tesla’s surge as the U.S. EV market leader, the question arises: could 2024 be the year Ford’s fortunes change, rewarding investors’ patience?

Ford Stock 2024 Forecast

Analysts on Wall Street express cautious optimism for Ford stock entering 2024, granting it a “Moderate Buy” consensus rating. Among the 14 analysts covering F stock, 6 rates it as a “Strong Buy,” 2 as a “Moderate Buy,” 4 as a “Hold,” and 2 as a “Strong Sell.” The mean target price of $14.42 suggests a 35% increase from current levels.

Morgan Stanley analyst Adam Jonas, a Ford stock bull, highlights 2024 as a critical year for the U.S. auto industry, emphasizing Ford’s unique position. Comparing it to the average S&P 500 company’s capital expenditures and research and development spending over 50 years, Ford accomplished the equivalent in 2.6 years, while General Motors achieved it in a mere 1.9 years.

Despite challenges in the U.S. auto industry, Ford appears poised for potential success in 2024. Here’s why:

1. Ford’s Diversified Portfolio

Despite slower-than-expected EV demand, Ford’s diversified portfolio, encompassing both internal combustion engines (ICEs) and hybrids, positions it strategically. Doubling down on hybrids has proven beneficial, attracting buyers cautious about battery electric cars due to factors like high initial costs and range anxiety.

2. Ford’s Earnings Power

Anticipating an additional $850-$900 per car assembled due to the United Auto Workers (UAW) contract, Ford aims to offset this impact through price adjustments and cost-cutting measures. Contrary to some analysts’ beliefs, CEO Jim Farley asserts that the company is far from peak profitability, generating near-record profits. Analysts predict a modest 7% dip in net profits for 2024 compared to 2023.

3. Ford’s Attractive Valuation

Trading at a next 12 months (NTM) price-to-earnings (PE) multiple of 6.8x and boasting an absolute market cap slightly over $41 billion, Ford presents attractive valuation multiples. The 5.8% forward dividend yield adds to its appeal.

In summary, barring a major recession or significant macroeconomic weaknesses in 2024, Ford appears poised for a more promising performance, potentially rewarding the patience of long-term investors.

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