Ford stock to close the gap with GM: Barron’s (NYSE:F)

Barron’s recently shared a favorable perspective on Ford Motor, pointing out an opportunity for the Dearborn-based automaker to narrow the gap with its Detroit counterpart, General Motors.

While Ford (F) has seen a modest 7% year-to-date increase, GM (GM) has surged by over 29% compared to the broader market’s 17% rise as represented by the S&P 500 (SPY).

Commenting on this unusual underperformance trend between the two automotive giants, Barron’s highlighted the similarities in their financial standing, suggesting that investors have yet to fully acknowledge this parity.

For Ford to catch up with its rival, the publication emphasized the necessity of a catalyst, with a strong emphasis on capital discipline as the key factor for this transformation.

Additionally, anticipated special dividends of up to $2.60 per share, decreased spending on electric vehicles, a heightened focus on quality improvement, and consequently, reduced warranty expenses are expected to contribute positively to Ford’s narrative.

This positive momentum is further bolstered by a flourishing U.S. auto market, with projections indicating an expected increase in new car purchases to 16 million by 2024 from around 15.5 million in 2021.

Barron’s suggested that a trim in the capital budget could be a significant indication of Ford’s commitment to enhancing its stock price, urging investors to pay attention to this strategic shift.

Despite these optimistic forecasts, sources like Seeking Alpha’s Quant System and Wall Street analysts maintain a hold rating on Ford (F). Notably, SA analyst Manuel Paul Dipold recently issued a sell rating for Ford, citing concerns around the stagnation of its primary market, the U.S., and the relatively cheap valuation based solely on non-GAAP metrics.