Is Ford Motor Company (F) A Good Car Stock To Invest In Now?
December 29, 2024
We recently compiled a list of the 10 Best Car Stocks To Invest In Now.In this article, we are going to take a look at where Ford Motor Company (NYSE:F) stands against the other car stocks.
The automotive industry has witnessed a constant churn of innovation over the last several decades, with car makers continuously providing drivers with new features. However, there has been a different pace of change lately, with the rapid adoption of electric vehicles (EVs) being the most talked-of topic in the industry.
READ ALSO: 10 Best Used Car Stocks To Buy According to Hedge Funds and 10 Best Self Driving Car Stocks To Buy Now.
A lot of the conversations in the automotive space currently revolve around robotaxis, the autonomous taxis for ride-hailing, especially after Elon Musk unveiled the Cybercab in October this year. His company is showcasing the self-driving two-seater at several key locations across the United States in December, with plans to deploy the autonomous services in California and Texas in 2025.
According to a report in Euro News, global EV sales surged in November, with a record-breaking 1.8 million units sold worldwide, overtaking the record set in the prior month by 100,000 units. China accounted for two-thirds of the sales during the month. Around 15.2 million EVs were sold between January and November, growing 25% year-to-date.
The report stated a 3% decline in EV sales in the region comprising the United Kingdom (UK), the European Free Trade Association (EFTA) and the European Union (EU). With 280,000 units sold in November, annual sales for the region reached 2.7 million units. However, the UK is having an improvement in the second half of the year; sales have grown 17% from last year, driven by the Zero Emission Vehicle (ZEV) Mandate.
China is not only leading the EV market but is also on track to take over the global auto industry because of its massive and growing capacity. Earlier this month, the Council on Foreign Relations (CFR) highlighted that the country’s EV capacity will soon match its domestic auto demand, whereas China’s car production capacity is already half of the global demand for automobiles.
It is projected to have a total output of 20 million electric vehicles in 2024, with production increasing between 4-5 million units annually, helped by heavy investments from Chinese firms to expand production. According to the New York Times, China also has the capacity to produce over 40 million internal combustion engine cars a year.
India’s auto market is also seeing impressive growth, contributing significantly to the global market. Annual production of automobiles in the country stood at 25.9 million units in fiscal 2023. The thriving vehicle market has also resulted in a booming auto components industry, which has grown 11.3% during the first half of FY25, driven by strong demand for larger and more powerful cars.
We sifted through screeners to identify stocks in the auto manufacturers, auto parts, and auto dealerships industries. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024. The 10 best car stocks to invest in now have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A Ford truck roaring down a highway, with powerful headlights blazing its way.
Number of Hedge Fund Holders: 36
Ford Motor Company (NYSE:F) is an American automobile manufacturer, founded in 1903, that sells commercial vehicles and luxury cars. The company has had erratic returns over the last few years, especially since 2021, due to heavy losses in its EV business unit, inflated warranty costs, and labor strikes.
As of the close of day on December 26, its share price had dropped by nearly 18% year-to-date, with a sharp dip since the Q3 2024 earnings call on October 28, in which Ford announced that it anticipates full-year EBIT to fall in the lower end of its guidance. When the fiscal year started, the automaker expected EBIT to be between $10 billion and $12 billion. The projection is now around $10 billion, as the company grapples with price wars and supply chain challenges.
Revenue for the quarter stood at $46 billion, up 5% from last year, driven by strong truck sales and the launch of Ford Explorer and Lincoln Aviator. Adjusted EBIT was $2.6 billion, with a margin of 5.5%, up 50 basis points year-over-year. The improvement was attributed to higher volume, a favorable mix, and lower costs during the quarter. EPS was logged at 49 cents per share, beating expectations of 47 cents.
While headwinds are likely to continue for Ford Motor Company (NYSE:F) heading into 2025, the company is determined to offset industry-wide pressures. It has reduced costs by $1 billion in the EV business this year. Moreover, Ford’s commercial and gas-engine divisions also delivered strong results in Q3 amid steep EV losses.
In a recent interview, CEO Jim Farley stated that Ford was ‘getting close’ to Level 3 autonomous driving, which allows drivers to take their hands off the wheel and eyes off the road.
Wall Street analysts have a consensus Hold rating for the stock, with an average share price upside potential of 16%. According to Insider Monkey’s database for Q3 2024, 36 hedge funds held investments in the company, making it one of the best car stocks to invest in now.
Overall F ranks 10th on our list of the best car stocks to invest in now. While we acknowledge the potential of F as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than F but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.
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