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Pros and Cons for buying a Ford Motor Company stock

Ford Motor is one of the most well-known automobile companies, which has been in the market for more than a century. Just like other old companies, Ford also experienced many difficulties in its business life cycle. As of now, the company is not in a positive stage financially. Over the past few years, the average stock trend is negative, which, according to NASDAQ, decreased from being $11.42 in 2015 and $8.8 as of 2020 data. However, in a highly competitive industry like an automobile, data analysts predict that Ford Motor stock is worth buying. If you think of whether or not the arguments are justifiable, let’s look into both sides of the story. 

Pros 

Valuation

Ford is offering a relatively low price in the stock market. Compared to 2015, when the average stock price per share of Ford Motor Company was $11.4, in 2020, it decreased to $8.79. However, analysts predict that by 2021 there will be a positive change in the trend of the stock thanks to the overall growth in the global auto market.

Automobile Industry Growth

The Automotive Industry Research shows that the sector is going to grow by 4.79% during the forecast period from 2019 to 2024. Technology is significantly improving for the vehicles, leading the auto industry to grow for the next decade. Ford Motor Company is one of the major market players in the U.S. market, and the growth in the sector is a substantial macroeconomic factor for their financial and economic growth. So, buying a Ford stock will be a valuable investment for the next couple of years.

Perspective

Ford is launching its new electrical vehicle (E.V.), the Mustang Mach-E, which will become available at the end of 2020 and accelerate into 2021 and 2022. Together with the overall growth in the automobile industry, the electrical vehicle push is an excellent way for Ford to become financially stable again.

Cons

Historically bad performance

When choosing which stock is worth buying, investors analyze the historical performance as the main factor to foresee their financial growth in the future. According to NASDAQ, when looking into the past five-year performance of the stock, it has decreased by an overall 23%.

Losing its share in the Chinese Market

China is the world’s largest auto market, which is much larger than the U.S.. The sales volume in the Chinese market exceeds 28 million, while in the U.S., it is only 17.5 million. Ford’s sales volume in the Chinese market has decreased over time, as they did not launch must-have vehicles, which would be suitable for the market.

Overall Auto Market slowing 

According to the International Monetary Fund, the automobile sector represented 20% of the US GDP slowdown in 2018. Additionally, the decrease in sales almost dropped the global trading by 30%. Automakers faced more pressure as the regulations got tighter, and trade barriers hit their businesses. 


All in all, if you think of investing in Ford Motor Company stock think of costs and benefits. In a highly volatile automotive industry, you cannot rely on historical data and performance of the stock. Instead, also take into consideration that data analysts predict the increase in Ford stock with the new launch of electric vehicles.  

 

February 28, 2020

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