Ford Stock Price Falls: Is It The Apple Of Cars?

January 30, 2013

If you're the sort of person who enjoys similes, you could spend a lot of time comparing today's car companies to Apple.

Like Apple, for example, General Motors came back from the brink of ruin to become a leader in the industry once more. Toyota followed the same path in the wake of 2010's high-profile recall fiasco and 2011's earthquake and tsunami that devastated Japan. 

You could also draw parallels between Apple and Tesla, thanks to the latter's innovative, beautiful, high-tech products. Heck, Tesla even pilfered Apple's ranks to sell its vehicles: George Blankenship, who designed Tesla's controversial showrooms, was also the driving force behind  Apple's monstrously successful chain of shops. And surely there are some linkages to be made between Tesla's polymath proprietor, Elon Musk, and Apple's famous co-founder Steve Jobs (though as we've discussed, Jobs himself would've been a lousy fit for the auto industry).

But at the moment, we're most intrigued by the similarities between Apple and Ford. Despite stellar sales and strong profits, the stock prices of both companies are tumbling.

Exhibit A: Apple [NASDAQ:AAPL]

Because Apple is bigger than Ford, its fall has been far harder and more visible. After peaking above $702 in September, the company's stock price has plummeted, finishing yesterday around $458.

In the grand scheme of things, that's still pretty good -- until 2004, Apple stock had never crossed the $10 mark. But for the past several years, analysts and investors alike have been charmed by Apple's super-hot product lineup and its accordingly super-hot balance sheets. Then in September, the luster wore off a bit. Apple released the somewhat underwhelming iPhone 5 and an operating system with several well-publicized problems (namely, Apple Maps). The iPad Mini that debuted at the same time began cannibalizing sales of its more profitable big brother, and for the first time ever, someone was giving Apple a run for its money in the smartphone market: Samsung.

All of which is to say that Apple is still a-okay, but no company or product stays at the top of the charts forever. (Remember IBM? Atari? Enron? Polariod? Blockbuster?) Apple was bound to slip sometime. Even though it's still flying high -- and some would say that it's due for another surge -- investors are disappointed to see that it's not the invincible company they once thought it to be.

Exhibit B: Ford [NYSE:F]

Ford's stumble is harder to explain.

True, Ford has hit a few rough spots over the past few years. It's still struggling to get back on top of the initial quality rankings due to problems with its Sync and MyFord Touch infotainment systems. The 2013 Fusion has already seen two recalls, and the 2013 Escape has been subjected to four. Ford is also facing considerable public scrutiny (and at least one lawsuit) over its fuel economy claims for the Fusion Hybrid and C-Max Hybrid. 

But of the Detroit automakers, Ford is the golden child, the one that managed to avoid the bankruptcy fate that befell its rivals at Chrysler and General Motors. In the wake of the Great Recession, it narrowed its focus with the widely lauded "One Ford" plan. And it's turned out some great-looking cars, including the 2012 Ford Focus and the aforementioned 2013 Escape and 2013 Fusion. Of all the automakers doing business in America, Ford continues to generate the most positive buzz.

So, why isn't its stock doing better?

After flirting with penny-stock status in November 2008, Ford's stock price soared over 1300% to reach $18.65 in January 2011. Since then, it's drifted slowly downward. Yesterday, it opened at $13.78 as Ford announced sales figures for 2012.

As it turns out, the company saw whopping pre-tax profits of $8 billion, net income of $5.7 billion, and fourth-quarter pre-tax profits of $1.7 billion -- the highest in over a decade. In a separate release, Ford announced that its share of the hybrid market jumped roughly nine points, while Toyota fell eight.

However, Ford's balance sheets weren't quite as bright as they were at the close of 2011, and the automaker predicted continued trouble ahead in Europe and South America.

At the end of the day, Ford's stock closed down 77 cents, at $13.01.

Our take

Markets are not rational. Stock prices are driven, in part, by analysts more concerned with short-term losses than long-term profits. Apple and Ford both suffer from heightened expectations because of their recent can-do-no-wrong reputations. Any crack in their armor is likely to cue the Cassandras.

We are not accountants. We are not lawyers. And we are certainly not financial advisors. But from where we sit, the minor setbacks facing Apple and Ford don't do anything to diminish their prospects down the road.

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