We recently compiled a list of the 10 Best Self Driving Car Stocks To Buy Now. In this article, we are going to take a look at where Ford Motor Company (NYSE:F) stands against the other self driving car stocks.
Advancements in artificial intelligence, data analysis, and machine learning are shaping how industries perform today. These three technological advancements have enhanced the potential of autonomous vehicles and Advanced Driver Assistance Systems (ADAS).
However, are the consumers ready to put their hands off the driving wheel and trust self-driving vehicles? Let’s explore how the autonomous driving industry is progressing with almost all major automotive manufacturers investing significantly to put their Full Self Driving (FSD) cars on the road.
The Global Autonomous Vehicle Industry
According to a report by Mordor Intelligence, the global autonomous vehicle market is valued at $41.10 billion in 2024. The market is expected to grow at a compound annual growth rate of 22.75% to reach $114.54 billion by 2029. The COVID-19 pandemic hindered the overall output of the automotive industry thereby delaying the production and roll-out of self-driving cars. In addition, increased government regulations to ensure road safety have also proved to be a barrier for automakers. However, with significant improvement in software and hardware technology backed by artificial intelligence, we see automakers rolling out their Level 2 and Level 3 autonomous cars on public roads.
For instance, on June 25 CNBC reported that Waymo a leading autonomous vehicle company, opened its self-driving robot taxis for users in San Francisco. The company claims that more than 300,000 people signed up for the service. To cater for the growing number of users Waymo One has rolled out a fleet of 300 cars in the city.
According to a survey by McKinsey & Company, automotive market leaders believe the autonomous segment to be less fragmented due to the complexity and investment involved in its operations. As per the survey, 15% of the respondents believe North America will have most companies working and deploying autonomous technology in the future. In contrast, 38% of respondents believe the European market to be led by at most two or three companies.
Regionally speaking, China and North America are leading the race to become the first countries to roll out Level 4 highway pilot technology. Respondents of the survey are equally divided with 58% believing either country could be the first in Level 4 technology.
As mentioned above, developing and rolling out autonomous vehicles requires a huge investment in software technology. However, the investment is also expected to return high margins. The survey found that experts believe autonomous vehicle software is expected to have an average margin of 15% and hardware technology will add another 10% to the margin, thereby making the autonomous vehicle segment a lucrative venture for automotive companies.
Latest Trends in the Autonomous Vehicle Industry
Emerging trends in the autonomous vehicle industry are paving the way towards achieving level 5 autonomy. Some of the latest developments in the industry include, the use of Internet of Things (IoT) to allow vehicles to connect with other vehicles, its environment, and the internet. This not only improves the vehicle safety by providing quick data acquisition and analysis to make timely decisions based on the traffic changes on the road. New sensor technologies such as the LiDAR scans the surrounding of the car using laser technology. When these LiDAR sensors move continuously using multiple laser sensors they create a 3D representation of the surrounding ensuring the vehicle drives safely without collision. Almost all level 3 autonomous vehicles use LiDAR scanners to enhance vehicle visibility to around 300 meters during daytime.
Moreover, advancements in artificial intelligence such as object detection algorithms along with the LiDAR help the vehicle detect pedestrians, traffic signs, and other vehicles on the road. Other deep learning algorithms are helping improve the user experience by enhanced voice recognition, gesture recognition, and sentiment analysis to help interact with the vehicle efficiently. Last but not the least, Big Data analysis techniques are being utilized by autonomous automakers to improve vehicle autonomy through analyzing data collected through radars, scanners, and cameras.
Our Methodology
To compile the list of the 10 best self-driving car stocks to buy, we looked at autonomous driving stock holdings of the Global X Autonomous & Electric Vehicles ETF. We selected the top 20 stocks from the ETF holdings and ranked the stocks that were the most widely held by institutional investors, as of Q1 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A Ford truck roaring down a highway, with powerful headlights blazing its way.
Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 41
Ford Motor Company (NYSE:F) is one of the best autonomous driving stocks, we say this because the stock was held by 41 hedge funds in Q1 2024, with total stakes worth $1.54 billion. Renaissance Technologies is the top shareholder of the company with a position worth $44.7 million.
Ford Motor Company (NYSE:F) is a renowned automotive company that develops, delivers, and services trucks, commercial cars, vans, sports and luxury vehicles. The company also helps its customers with various financing options including loans leases, and dealer financing. Ford Next segment of the company focuses on the development cost of autonomous vehicles and related businesses including, equity ownership in Argo AI, and other next-generation automotive technologies.
In a recent interview with Bloomberg, Ford Motor Company (NYSE:F) CEO revealed the company has achieved level 3 autonomous driving in its prototype vehicles. This marks a significant step towards the company’s pursuit of advanced driver assistance system. As of now the company has already launched Level 2 autonomy following its launch of BlueCruise technology that allows hands free driving.
The company posted mixed results for the second quarter of 2024. The Ford Pro business, which specializes in catering for the commercial sector including fleet management, comprehensive vehicle solutions for business needs, maintenance and financing services reported high margins and revenue. The Ford Pro revenue increased by 9% during the quarter amounting to $70 billion and contributed a solid $2.6 billion to the EBIT of the company with margins at over 15%. The growth in the segment was on the back of a 3% increase in wholesalers during the quarter.
Ford Motor Company (NYSE:F) faced some headwinds during the quarter. Its Ford Model E went down by $1.1 billion due to industry price pressures and a wholesale decline in this segment. Moreover, the loss in the Ford Model E along with a spike in warranty costs drove the company’s earnings 35% lower to $0.47 per share. Management expects the technology-related warranty costs to normalize in the future as the technology matures and the company can deploy Over the Air (OTA) capabilities to address technology issues.
On the positive side, the company was able to grow its overall revenue by 6% to $47.8 billion during the quarter. Moreover, Ford Motor Company (NYSE:F) also performed well financially and generated adjusted free cash flow worth $3.2 billion up $0.3 billion year-over-year.
The competitive edge of the company lies in its ability to lead the market with its brand reputation. The company has led the US automotive market for 3 consecutive years and continues to do so from the Q1 of 2024. Ford Motor Company (NYSE:F) is cheap at current levels. It is trading at 5 times its forward earnings, a 65% discount to its sector. Moreover, its earnings are also expected to grow by 59% during the year to reach $0.46. 26 analysts have a consensus Buy opinion on the stock, with their median price target of $13 presenting an upside of 33% from current levels.
Overall F ranks 10th on our list of the best self driving car stocks. While we acknowledge the potential of F as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than F but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.