F - Ford: Despite Strong Q2 EV Sales Losing Market Share To Pure-Play EV Makers

2024-07-03 15:27:46 ET

Summary

• Despite good Q2 EV sales, Ford Motor Company's market share is expected to decrease as EV manufacturers dominate.
• Ford's profitability is expected to remain stable, while free cash flow margins are expected to decrease as Ford will be forced to increase its reinvestment to remain competitive.
• At current prices, Ford's risk-reward profile suggests slightly negative excess return potential.

Executive Summary

Ford Motor Company ( F ) stock is currently trading around its fair market price.

We expect Ford to shrink its market share in the foreseeable future, as prominent EV manufacturers like Tesla (TSLA) and BYD (BYDDF) will strengthen their market dominance further and erode the market share of legacy automakers.

At the same time, we expect the firm to maintain its historical profitability, while free cash flow margins are expected to decrease in the next 3 to 5 years, as Ford will be forced to increase its reinvestment to remain competitive, to then recover around the historical average by 2033.

At current prices, our assumptions suggest that Ford’s risk-reward profile has the potential to generate a slightly negative excess return (alpha -2.1%)....

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