We know Ford Motor Company (NYSE: F) plans to increase revenues and profits by switching to electric vehicles. That could give a good boost to Ford stock – but will it be enough to make Ford a “multi-user” with earnings rivaling those of EV makers such as Tesla (NASDAQ: TSLA)?
In that Motley Fool Live broadcast, written on May 27, Industry focus Presenter Nick Skiple and Motley Fool Senior Automotive Specialist John Rosiver will take a look at the issue and explain why, even if Ford’s stock price doesn’t skyrocket like Tesla, they can still offer investors outperforming results as they seek to embrace the future with zero emissions.
Nick Skipl: The reader asks – that’s a good question. We can probably talk about this from multiple angles, it says, “Can Ford take shape from now on? Their market capitalization is much lower than Tesla’s. Comments? Thank you”. What do you think? Today we can look at Ford’s market cap. I think that’s about $ 80 billion, $ 57.44 billion according to Google. What do you think? Do you think Ford has the potential to grow out of here, or is it more of a profit game when dividends resume? What do you think?
John Rosewear: Well, I’ve watched the auto business for a long time, so I’m going to say that based on older numbers, there is a gradual rise here and you get these tasty dividends that should return at $ 0.15 a quarter, 0.60 dollar per share, I don’t know what it will give now, but I know that it is quite attractive. But it’s clear that you’re looking at Tesla’s valuation, you’re looking at Ford’s valuation, you’re looking at where you think the companies are going over the next few years, it’s clear that one of these things is not the same, and that something needs to be fixed. I don’t think Ford is going to pay $ 300 per share. I would believe $ 30. At the same time, we think Tesla will likely have to backtrack from its crazy growth last year, too. I don’t think too many people will be surprised if this continues and Tesla tackles something more realistic for its likely 2030 prospects. Will Ford use multibags? It would really surprise me, but in the last five years in the automotive business, a lot of things have surprised me. [laughs] I dont know. I wouldn’t bet on that too much. I’m a shareholder in Ford and I’m going to keep it, but I’m thinking more about the extra dividend income and some gain in the share price, maybe doubling from here as the bottom line grows, but I wouldn’t. ” I don’t think a multibag. [laughs]
Skipl: Yes, you have to remember that Ford Motors has been around for over 100 years and the industry has been around for over 100 years. There are more registered vehicles on the roads than licensed drivers. It’s not like the auto industry can have big, incredible growth in terms of units delivered. This is more conversion and search for other sources of income. I think Ford can definitely get out of here. I wouldn’t consider Tesla as big as Ford. I think Tesla’s market cap is probably a little high compared to what the business would support today. You might argue that Ford is perhaps a little undervalued, although so far this year the market has begun to accept the story of big cars in electric vehicles to a much greater extent than in the past few years.
Rosevear: I want to make one comment in this regard, that someone told me yesterday that all Ford does is defend its territory, and I said yes, but Ford is being judged as if it is about to cede its territory. Ford is roughly holding on to its market share in pickups, SUVs, commercial vans and the like, while generating equipment profitability similar to what it is getting from ICE now that EV technology matures after 2025 or so, and is generating additional revenue, profits. from adjacencies, software, services and so on. There is a story of gradual growth here, but at the same time, yes, if Ford is successfully defending its territory, you should take a look at some of these upstarts and say: Lordstown Motors going to fight with Ford, for example, in the field of commercial vehicles? We’re going to replay versions of this story as other active players do or don’t play, but yes, it’s a defense game, but maybe Ford was paid to lose ground, but it said, no, I don’t think that’s 10 – baggy out of here. I want to because, as I said, I held it for a long time. I bought it in 2009 at the address I won’t say, but it was less than two bucks a share, [laughs] I’ve been sitting on this for a long time, and I would have liked to see it climb much higher, but I think the real story here is a gradual rise in net income, a rise in the share price plus dividends.
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