Should You Buy Ford While It's Trading Below $10.50?

Ford Motor Company (NYSE: F) finds itself at a crossroads as it navigates a challenging landscape. Its electric vehicle segment has struggled, and today, the stock trades 33% below its 52-week high. The automotive industry also is feeling the pressure from intensifying trade wars as President Donald Trump recently announced a 25% tariff on all imported vehicles and foreign-made auto parts.

The stock is priced at what some may consider an attractive valuation and also offers a solid 6% dividend yield. But is it a good buy for investors? Let's dive into the company, where things could go from here, and whether it deserves a spot in your portfolio at today's prices.

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Examining Ford's business

Ford is a giant in the automotive world. According to Car and Driver, the Ford F-Series of trucks was the top-selling vehicle in the U.S. last year, with 732,139 units sold. The company was the first to offer affordable vehicles to the masses and now operates across 100 countries globally.

The sheer size of Ford's business is huge, as evidenced by its $185 billion in revenue in 2024. To put this into perspective, Nvidia generated $130 billion in revenue last year. However, Ford stock trades at a cheap valuation with a price-to-earnings ratio of 6.9.

Ford sports this cheap valuation for a reason. For one, it operates in a capital-intensive business that requires substantial investments in skilled labor, technology, production facilities, and research and development to maintain a competitive edge. Not only that -- it is also a low-growth company operating in a highly competitive and cyclical industry. Last year, its net income was $5.9 billion, while its profit margin was just 3.2%.

Consumers' shifting preferences

Like many automakers, Ford has made a big push into electric vehicles (EVs) in recent years, driven by carbon emission reduction goals. The company has a Ford Model E division where it manufactures EVs such as the Mustang Mach-E and Ford F-150 Lightning.

However, it announced it would be scaling back its ambitious EV plans. According to CFO John Lawler, the company is adjusting due to "pricing and margin compression" and will reduce its share of capital expenditures for pure EVs from 40% to 30%.

Image source: Getty Images.

With weaker-than-expected consumer demand, pricing wars, and other pressures, the company postponed the launch of its next EV pickup truck until 2027. It also announced it would scrap plans for a large, three-row EV SUV and offer a hybrid version to better meet consumer demand. According to President and CEO Jim Farley, "hybrid trucks are a key growth area," which "is allowing us to capture the lion's share of revenue and command pricing power within the pickup truck market."

The issue of tariffs

On March 26, President Trump announced he would put a 25% tariff on automotive imports as part of the White House's efforts to boost domestic manufacturing. The tariffs complicate things for automakers, who source many components worldwide.

However, it may not be all bad news for U.S.-based automakers like Ford. According to JPMorgan analyst Ryan Brinkman, the new tariffs could "materially lessen the burden" for U.S. automakers and offer a "significant reprieve" for automakers that produced finished vehicles in the U.S. He estimates that tariffs would cost Ford about $4.5 billion, down from his previous estimate of $6 billion.

Is Ford a buy?

Ford is pivoting toward hybrids, which I think is a wise move. The stock is priced cheaply and offers an attractive dividend yield, which investors may find appealing.

However, the stock has failed to deliver for investors. Over the past two decades, it has delivered a total return (which includes the effect of reinvesting dividends) of 81.5%, or just 3% on an annualized basis.

The issue with Ford isn't necessarily the business, but that the automotive industry is highly competitive and hard to stand out in. Although Ford is a recognizable brand, consumers have countless options. This competitive environment, coupled with the capital-intensive business, is a big reason why Ford has meager margins. I think investors are better off putting their money elsewhere.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Nvidia. The Motley Fool has a disclosure policy.