Ford Motor Company (F) Stock Will Benefit From Alexa Deal With Amazon.com, Inc.

AMZN and F stocks will benefit from the integration of Amazon's Alexa in Ford cars.

  • The possibility to be able to control devices and services by voice commands will make Ford's vehicles more attractive.
  • Since other car makers would probably follow Ford's move, it will benefit Amazon as well.
  • In my view, both Amazon (NASDAQ:AMZN) and Ford (NYSE:F) stocks are a smart long-term investment.

At the 2017 Consumer Electronics Show (CES) that took place in Las Vegas between January 5 to 8, Ford Motor Company (NYSE:F) announced a new collaboration with Amazon.com, Inc. (NASDAQ:AMZN) which will enable consumers to use Alexa in Ford cars. Amazon Alexa has become very popular, and many people have received an Echo or Echo Dot this holiday as a gift. According to Ford, Alexa in its cars will provide access to shop, search, and control smart home features while driving. What's more, the integration of Alexa in Ford cars will allow Ford vehicle owners, by using voice commands, to remotely start the car from home, lock or unlock doors. Also, while driving, Ford car owners will be able to order items on Amazon, listen to audio books, and transfer local destinations to the in-car navigation system.

Don Butler, executive director, Ford Connected Vehicle and Services, explained:

“Ford and Amazon are aligned around a vision that your voice should be the primary way to interface with your favorite devices and services. Customers will be able to start their vehicles from home, and manage smart home features while on the road – making life easier.”

Steve Rabuchin, vice president, Amazon Alexa, said:

“We’re excited to work with Ford to enhance the driver experience both inside and outside of the vehicle. We believe voice is the future, and this is particularly true in cars. The ability to use your voice to control your smart home, access entertainment, manage to-do lists and more makes for an extraordinary driving experience. We can’t wait for Ford customers to try this out.”

As I see it, the integration of Alexa in Ford cars will benefit both companies, Ford and Amazon. The possibility of controlling devices and services by voice commands would make Ford's vehicles more attractive. Since other car makers probably would follow Ford's move, it will benefit Amazon as well.

Also read: Is Amazon.com, Inc. Becoming A Threat To Alphabet Inc?

What To Expect From Ford's Next Earnings Report

Ford Motors is scheduled to report its fourth quarter financial results on Thursday, January 26, before markets open. According to 18 analysts' average estimate, Ford is expected to post a profit of $0.36 a share, a 38% decline from its actual earnings for the same quarter a year ago. The highest estimate is for a profit of $0.42 a share while the lowest is for a profit of $0.32 a share. Revenue for the fourth quarter is expected to decrease 6.9% year over year to $35.22 billion, according to 15 analysts' average estimate. There were three up earnings per share revisions during the last 30 days. Since Ford has shown earnings per share surprise in four of its last seven quarters, as shown in the table below, there is a chance that the company will beat estimates also in the fourth quarter.

Amazon Earnings surpise

Ford Stock Performance

Since the beginning of 2016, Ford stock is down 10.4% while the S&P 500 Index has increased 11%, and the Nasdaq Composite Index has gained 10.5%. Moreover, since the beginning of 2012, Ford's stock has gained only 17.4%. In this period, the S&P 500 Index has increased 80.4%, and the Nasdaq Composite Index has risen 112.3%.

Also read: Don't Buy Into The Hype Around Ford Motor Company (F) Stock

What To Expect From Amazon's Next Earnings Report

Amazon is scheduled to report its fourth quarter financial results on Thursday, January 26, after market close. According to 36 analysts' average estimate, Amazon is expected to post a profit of $1.36 a share, a 36% increase from its actual earnings for the same quarter a year ago. The highest estimate is for a profit of $1.86 a share while the lowest is for a profit of $0.36 a share, quite a big difference. Revenue for the fourth quarter is expected to increase 25% year over year to $44.67 billion, according to 35 analysts' average estimate. There were two earnings per share down revisions during the last 30 days. Since Amazon has shown significant EPS surprises in both directions, in its recent five quarters, as shown in the table below, it is difficult to predict if the company would beat expectations in the fourth quarter.

Ford earnings surprise

Amazon and Ford Stock Performance

Since the beginning of 2016, AMZN's stock is up 17.9%, Ford stock is down 10.4% while the S&P 500 Index has returned 11%, and the Nasdaq Composite Index has gained 10.5%. Moreover, since the beginning of 2012, AMZN's stock has gained an impressive 360.4% and Ford's stock has gained only 17.4%. In this period, the S&P 500 Index has increased 80.4%, and the Nasdaq Composite Index has risen 112.3%. According to TipRanks, the average target price of the top analysts is at $956.84, representing an upside of 20.1% from its January 9 close price of $796.92, which appears reasonable, in my opinion. According to TipRanks, the average target price of the top analysts is at $12.20, representing a downside of 3.4% from its January 9 close price of $12.63, however, in my opinion, shares could go higher.

Ford and Amazon stock Valuation Comparison

The table below shows important valuation and growth parameters for both companies. It is clearly evident that Amazon is a high growth company, and Ford's stock is an example of value stock; low P/E ratio and generous dividend yield.

AMZN and F stock valuation comparison using Price earnings, dividend etc.

Source: Portfolio123

 Conclusion

The collaboration between these two leading companies, Ford and Amazon, will benefit both companies. As I see it, the integration of Alexa in Ford cars is a very promising development. The possibility of controlling devices and services by voice commands would make Ford's vehicles more attractive. Since other car makers probably would follow Ford's move, it will benefit Amazon as well.

Looking to invest in auto stocks? Here are our latest Top Auto Stock Picks which have consistently outperformed the market


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Arie Goren Arie Goren   on Amigobulls :
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  • I do not have any business relationship with the companies mentioned in this post.
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