Why Ford Stock Will Never Recover from the Coronavirus Crash

Coronavirus has rattled the entire U.S. stock market, but Ford stock faces an even more devastating one-two punch from COVID-19.
Posted in: MarketsOp-ed
March 16, 2020 1:32 PM UTC
  • The painful U.S. stock market crash has clipped over 40% off Ford’s valuation.
  • The coronavirus pandemic will only amplify the damage to the company’s prospects. The virus’ biggest victims are Ford’s most influential customers.
  • Younger drivers care more about climate change and will not purchase pickup trucks like the Ford F-150.

Ford Motor Company’s (NYSE:F) stock price has taken a hammering since January. Since the first time I warned about the company’s grim prospects, the stock plunged more than 40%. The coronavirus outbreak has only magnified the company’s woes.

Observe the brutal capitulation of Ford Motor Company stock since January. | Source: Yahoo! Finance

The automobile industry is cyclical. But Ford has failed to make the most of the boom cycle in the industry.

The stock has languished in a downtrend for over six years. With U.S. auto sales flatlining, the contraction cycle of the industry is staring the company right in the face.

And that was before the coronavirus pandemic began to wreak havoc on a global level. The outbreak may be the final nail in Ford’s coffin.

Declining Baby Boomer Population Will Crush Ford

Legacy U.S. automakers must navigate the ugly one-two punch of an impending recession and a declining ageing population.

Goldman Sachs has already darkened its outlook for the U.S. economy, predicting that it could shrink by 5% in the coming quarter. And the population of baby boomers – Ford’s biggest buyers – is dwindling.

Ford’s chief demographic is beginning to dwindle. | Source: Bain

The ongoing coronavirus pandemic threatens to amplify this trend.

The U.S. government has done a terrible job of containing coronavirus. And because the virus is much more fatal for people over the age of 50, it will hurt Ford’s most important consumer group.

Coronavirus has a higher fatality rate among the ageing population. | Source: Worldometers

Ford’s F-150 accounts for over 90% of the automaker’s total profits. The average age of a pickup truck buyer in the U.S. is 55 years.

Changing demographics will gravely impact conventional automakers like Ford. | Source: Bain

But the automaker was struggling even before coronavirus sent the global economy into a tailspin.

Ford had announced ambitious restructuring plans right before the outbreak. Those plans will have to take a backseat as coronavirus has disrupted both demand and supply.

Millennial Environmentalism Heightens Demand Woes

Millennials and Gen Z are replacing baby boomers in the U.S. auto market, and carmakers are finding that their tastes are wildly different from those of the baby boomers.

Millennials and Gen Z are more mindful of the climate change crisis, according to a poll conducted by Gallup.

Younger generations are more concerned about the environment. | Source: Gallup

That likely means shifting demographics will lead to a significant drop in demand for climate-hostile vehicles like Ford’s F-150 pickup trucks.

And leadership’s efforts to pivot away from the gas-guzzling F-150 have been unsuccessful.

With no replacement of the F-150 in sight, it’s never been more clear that bankruptcy is unavoidable for Ford Motor Company.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.

Josiah Wilmoth edited this article for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor or find a factual, spelling, or grammar error, please contact us.

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Ayush Singh @TraderBased

Ayush is a financial blogger and a swing trader. He has roughly four years of experience covering the U.S. stock market and has consistently featured on Tip Ranks' list of top performing bloggers. He is based out of Indore, India and is also managing the portfolios of several local retail clients. You can email him on Ayush.Singh93@outlook.com

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