Is Ford a hybrid winner and Tesla an EV loser?

In the latest installment of Yahoo Finance's Good Buy or Goodbye, BD8 Capital Partners CEO and CIO Barbara Doran steps inside the driver's seat and outlines her preferred auto stock trades currently, shining some headlights onto why major automaker Ford (F) is a "good buy" and EV pioneer Tesla (TSLA) is a stock investors should say "goodbye" to.

Doran finds Ford to be performing in line when compared to General Motors' (GM) proportionally larger figures, giving the former more room to grow, especially as it prioritizes new hybrid models while EV charging infrastructure is slowly built out.

"There's a number of catalysts because this has been an ongoing turnaround story, and they have done so many things," Doran tells Yahoo Finance. "One of them... is just rationalizing their product lineup. They're really looking for which vehicles are the most profitable and for them that tends to be their pickup trucks, their SUVs, they've really scaled down on the cars..."

Tesla's biggest challenge, according to Doran, is that it's beginning to lose market share to domestic and Chinese competitors. "The total pie has expanded, but the pie is not expanding for now. So they're losing share both in China and in the US, and you've seen this through their price cuts."

Catch more of Good Buy or Goodbye here, or watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: It's a big noisy universe of stocks out there. Welcome to Good Buy or Goodbye. Our goal is to help cut through that noise to navigate the best moves for your portfolio. Today we're looking under the hood of US automakers amid a challenging EV market. So what's the best way to play it now?

I'm here with BD8 Capital Partners CEO and Chief Investment Officer Barbara Doran. Barbara, thanks for being here. Appreciate it.

BARBARA DORAN: Delighted.

JULIE HYMAN: So let's get to your buy stock, first of all. And it is Ford which, as we know, has had a bit of a time as have many of the automakers recently. But especially trying to get that balance with EVs and other types of vehicles. So let's go through your bullish case here. First of all, you say the valuation is attractive here and there actually are some catalysts that could help it going forward.

Yeah, there are. And if you look at Ford versus GM, it's really underperformed year-to-date. And for the last year, Ford is up 3% year to date, GM 20%. For the last year, GM up 25%, and Ford up 1%. And so there seems to be an opportunity here.

I mean, it's trading in line with its historical valuation, which has been all over the place. But I think it's interesting here because it is a cyclical. And if you look where we are in the economy, the economy is doing very well. And retail sales this morning were very strong. So I think it's a good point to be considering autos. And I think Ford over GM is an interesting one.

JULIE HYMAN: And just briefly what are some of the catalysts that you're looking toward here?

BARBARA DORAN: Well, there's a number of catalysts because this has been an ongoing turnaround story. And they have done so many things. I mean, one of them is just rationalizing their product lineup. They're really looking for which vehicles are the most profitable. And for them, that tends to be their pickup trucks, their SUVs, they've really scaled down on the cars.

And so they're really looking at that and trying it even we'll talk about the EVs, what they're doing there. And also just even in production, they're rationalizing their international, they've closed a plant in South America. That means the utilization in other plants is good. They're cutting staff.

And they've hired three important new senior managers. One who was the Toyota North American Marketing chief. And that's a big deal because they've done so well in the US. In fact, they're number one in EV sales. So that's a coup.

And the other one is somebody to really oversee their dealer network worldwide, which is 10,000 dealers. So they're really going after every aspect of the business. And so there's just a number. And if saw their quarterly numbers in February, they beat earnings and revenues. And part of that was cost cutting, but part of it's the sales are doing well.

JULIE HYMAN: And then let's dig into a little bit more of that sort of right sizing of the investment in electric vehicles and autonomous vehicles.

BARBARA DORAN: Yeah, because I think we now know it's stalled out worldwide in terms of what's happening penetration of EVs. You've seen it in China. You've seen it here in the US. At least for now, it seems to have stalled out for the whole US market at about 7.5%.

But what's really gone gangbusters this last year is hybrid sales, you know. And you can go into the reasons why. I mean, I just bought a car, and I did a gas guzzler because it's the charging stations issue. But anyway, hybrids are really hot.

And so Ford has pulled back on their spending on EVs. They are delaying their EV rollouts a year or two. And they are really focusing much more on hybrid. And what's that doing is freeing up a lot of capital, you know, which is good for their cash flow. And with all the other cost cutting initiatives, they're really this fourth quarter beat may not be the last beat that we see.

JULIE HYMAN: And then finally, there's sort of-- and you sort of alluded to this. But refreshed vehicle lineup, that there'll be new cars for people to choose from.

BARBARA DORAN: Yeah, and that's a big deal because we're going to talk about Tesla next. And they have, whether it's their they're doing their iconic cars, the Mustang, I mean, there are number one selling vehicle in the US is a Ford truck, a pickup truck. So they are coming out with just new things they're getting rid of.

They're looking at even simple things like what is not used in the car and getting rid of that, and streamlining, and getting their services, and their tech, warranties, all that stuff so that it's really one package. So that's really important. So you're getting into a vehicle and you're feeling like, this is new, this is fun.

JULIE HYMAN: And as always, we'd like to talk about what the potential risk is to the bull case. In this case, it's that we see a general downturn in spending on vehicles.

BARBARA DORAN: Yeah. I mean, that is clearly. I mean, you're not going to get around the fact that Ford and GM no matter what they do are cyclical. So if you have a downturn in consumer spending, you know, autos are where they're going to be hit. I mean, we had a lot of pent up demand after COVID. Couldn't get parts. Nobody could get cars. So, on that sort of normalizing, but that's always going to be the big risk.

JULIE HYMAN: Right. Do you have a position in Ford shares?

BARBARA DORAN: No, I do not.

JULIE HYMAN: OK, let's get to Tesla, which you alluded to. Obviously, it's been falling. It's down about 30% or so year-to-date. Here, we've got more competition in the space.

BARBARA DORAN: Yeah, now, we talked a little bit about the EV market in general. And this is their only product. They don't have hybrids. They don't have anything else. And so when you see the whole market slow down, it's a question, what do they do?

But the big concern thing is that they're actually losing share. I mean, you think OK the total pie is expanding. But the pie is not expanding for now. So they're losing share both in China and in the US. And you've seen this through their price cuts.

In the US, if you look through the months leading up to the end of the fourth quarter calendar year last year, their prices are down on average almost 30%. That's huge. And when you see any car dealer or anybody having to cut prices like that to move it, it's not a good thing.

JULIE HYMAN: Right. And, of course, now, there's also talk about, are the products are we going to get new models? Are we going to get refreshed models?

BARBARA DORAN: That's a big problem. I mean, they have no new products. And Elon just announced a few days ago that they are not going to do the low cost model.

JULIE HYMAN: Well, he didn't say it. He said it wasn't necessarily true. It was Reuters that reported it. And he said, that was a lie. And then he said, but we're going to introduce the robotaxi, or we're going to announce the robotaxi.

BARBARA DORAN: Right. Well, you know, it's interesting. Because if they were not to do the low cost model, the luxury segment, that's another part of the EV story is pretty saturated right now. So you need to lower the cost. So I don't think he can afford to take that off the table.

But the robotaxis, I do not see as the end all and be all. Because if you look at the market right now, I mean, self-driving cars, they're only legal in three states. They are only being tested in six cities and around the world, two in China four here. And you've got so many engineering problems. I mean, eight years ago, Musk said, we're going to roll out.

You had Apple after 10 years and billions of dollars and 5,000 people on the case fold their effort. Engineering is very tough. And they'll probably be higher cost because of the sensors, and cameras, and all that stuff in terms of the technology.

So I think the market could develop. It could be that in five to 10 years, we're saying, wow, let's get on our A robotaxi. But there's a lot of issues, not least regulatory. And moral. Some people have a real problem with it.

JULIE HYMAN: Well, let's get finally to how this thing is priced. Because the valuation is effectively-- if you look at this versus a GM or Ford, and it's always been this way. It's valued more like a tech stock than like an auto stock.

BARBARA DORAN: Yes, it is. And I don't agree with that. I never have. And if you look at it right now, it's 62 times versus GM is 4.5, 4 to 6.6. If you even put a 10 P on the stock, it would be in a $20 to $25 stock. So I think the stock will just continue to come down because it's hard to see what's going to turn it around. Maybe the robotaxi is in five years. But I don't see a near-term catalyst for them.

JULIE HYMAN: And just like we talked about the downside, the down risk for the bull case, the up risk, I guess. For this is that, he does come out with the robotaxi by the end of the year. And it does great.

BARBARA DORAN: Yeah, it does great. But you know what? They had a recall of 2 million cars that had autopilot just in December because the autopilot wasn't working properly. It wasn't doing-- well, at least the regulators felt, it wasn't having the proper alerts to say, hey, you're falling asleep at the wheel.

So I think that is the risk. And if it does take off, it could save the company. But it would have to take off and you'd have to have, I don't see-- they haven't even made their applications in California yet.

JULIE HYMAN: All right, Barbara, thank you so much. Really interesting stuff on Ford and Tesla. And just to recap, what you're telling people, tell investors to buy Ford amid that attractive valuation moving past peak spending on EVs and AVs, and that refreshed vehicle lineup on the other side.

You say avoid Tesla. We've got a high valuation. We've got an aging lineup of vehicles. And there is more competition in EVs.

Thank you so much. Really appreciate your time.

BARBARA DORAN: You're welcome. Thank you.

JULIE HYMAN: And thank you for watching Good Buy or Goodbye. We'll be bringing you three new episodes three times a week at 3:30 PM Eastern.