Shares of automobile giant Ford Motor Company (F) have trailed the broader markets in the last two decades. Ford Motor stock has fallen by 21% since February 2014 and is down 11.7% in the last 20 years. Even if we account for dividend reinvestments, Ford stock has returned just 58% since February 2004, compared to the 535% returns of the S&P 500 Index ($SPX) during this period. 

Trading 53% below all-time highs, Ford stock currently offers shareholders a tasty dividend yield of 4.96%. Let’s see if this beaten-down auto stock is a good buy right now. 

Ford Picks Up Pace in EV Segment

Ford is among the largest automobile manufacturers in the world, with a strong presence in the U.S. Similar to other legacy manufacturers, the company aims to gain traction in the rapidly expanding electric vehicle (EV) market. 

In 2023, Ford sold 72,608 electric vehicles, an increase of 18% year-over-year. Its EV shipment growth was driven by America’s best-selling electric truck, the F-150 Lightning, and the Mustang Mach-E. 

The company sold 37,229 hybrid vehicles in Q4, up 55% from the year-ago period. In 2023, hybrid sales grew by 25% year over year. While these numbers might seem impressive, investors should note that Ford remains cautious due to an uncertain macro environment and sluggish consumer spending, both of which have impacted demand in the EV segment. 

During its Q3 earnings call, Ford emphasized several customers in North America are unwilling to pay a premium for EVs compared to internal combustion engine (ICE) vehicles. Further, it decided to postpone $12 billion in EV-related capital spending, making investors nervous. Ford explained it is not lowering capital expenditures for future EV models. Instead it plans to slowly ramp up manufacturing capabilities in this segment. 

Ford’s EV segment remains unprofitable, and reported an operating loss of $1.3 billion in Q3 of 2023, while sales grew by 26%. In the first three quarters of 2023, Ford’s EV segment reported an operating loss of $3.1 billion. 

The automobile sector is capital-intensive, and Ford will have to expand its EV shipments significantly before it benefits from economies of scale. 

Looking ahead, Ford will report its full Q4 results on Feb. 6.

Is Ford Motor Stock Cheap?

Analysts tracking Ford expect sales to rise from $149 billion in 2022 to $171.6 billion in 2024. However, its widening EV losses and rising labor costs indicate the company will end 2024 with adjusted earnings of $1.74 per share, down from $1.88 per share in 2022. 

Priced at 6.81x forward earnings, Ford stock is quite cheap, given its forward dividend yield of 4.96%. Ford pays shareholders a quarterly dividend of $0.15 per share, up from $0.10 per share in the year-ago period. 

Out of the 17 analysts covering Ford Motor stock, five recommend “strong buy,” two recommend “moderate buy,” seven recommend “hold,” and three recommend “strong sell.” The average target price for Ford stock is $13.52, indicating an upside potential of 11.4%. After accounting for dividends, total returns will be closer to 17%. 

The Takeaway

While Ford stock is cheap, the company continues to wrestle with industry-wide headwinds. It is the second-largest EV manufacturer in the U.S., but this high-growth business segment will report losses in the next few years. 

Ford does not offer a compelling risk-reward profile to shareholders, and might continue to struggle to outpace the markets going forward.