Ford (F) stock price rose 7% yesterday but is still the lowest since 2009. The entire automobile industry should expect a 50% plunge in car sales in Q2 2020.
Ford Motor Company (NYSE: F), the American car manufacturer, recorded a good rise in its stock price on Wednesday when it closed 6.79% higher than what it opened with. At the time of writing, the stock remains on a bullish run and has risen by 2.39% trading at $5.15 in the pre-market.
However, the car manufacturer announced about a week ago that its sales have fallen in the first quarter of 2020 by 12.5%, which is not as bad as Edmund’s estimated. Ford’s decline was 160 basis points better.
Woes have been compounding for Ford (F) stock in the last 15 years, and the firm’s total return yearly hinged at -1.1%. Shareholders of the firm time have been losing ground even when the U.S. market as a whole recorded a positive annual return of 7.4%. With these statistics, it is safe to say that Ford stock performance is unacceptable.
Ford stock, despite its bullish run on Wednesday, still is trading at its all-time low since 2009. Before the global coronavirus pandemic, some investors were cautiously optimistic about the stock’s chances in 2020.
According to Chris Lau, Ford is in an excellent position to benefit from the sales of new 2020 model vehicles, especially the SUV category. Lau revealed that Ford has some 2019 units in inventory, but since 2020 models are already selling, profit margins will inch higher throughout next year. An expert wrote in October:
“At a recent price of around $9 a share and a dividend of almost 7%, investors should buy Ford at current levels.”
Forecast: Automobile Industry to Suffer the Highest Sales Drop
Outside the entire tragic narrative about Ford (F) stock in its all-time low since 2009 and its bad performance in Q1 2020, it has been predicted that car sales will fall by over 50% in Q2 in the U.S.
This decline could be the biggest drop on record in more than 40 years of auto sales data collection.
Currently, the highest ever plunge recorded in car purchase amounts was a 38% drop experienced in Q1 2009 towards the end of the Great Recession. Meanwhile, the coronavirus pandemic is proving to be one of the greatest crises in the history of the auto industry.
Chances for Ford (D) Stock to Rise Again
Will Ashworth, a business and investment writer, said he believes that Ford stock could make its way back from the wilderness.
In an article Ashworth published in March, he noted that the record U.S. household debt was going to make it difficult for the company to grow, however, now that the coronavirus has devastated the economy, it seems like an understatement.
He believes that with gas prices at record-low levels, Ford is going to be tempted to boost sales of its F-150 gas guzzlers to keep all of its balls in the air, and in the process, slowing its drive to electrify its vehicles.
According to an anonymous analyst at Automotive News, the coronavirus will cost the company $1 billion in earnings before interest and taxes. As a result of COVID-19, Ford would be forced to shut down production in both North America and Europe, its two strongest markets.
To survive this shock, Ford maxed out its two lines of credit, doubling the amount of cash on its balance sheet to $30 billion. In 2019, Ford paid out $2.4 billion in dividends. By suspending it, the company will save approximately $600 million per quarter in cash.