We're Number Two! Tesla Tramples Ford in Investor Value, Targets GM
For a car company that sells a tiny fraction of the volume put out by the likes of Ford, General Motors and Fiat Chrysler Automobiles, Tesla’s investors have given the electric automaker clear bragging rights.
Despite generous debt, tight timelines and razor-thin profitability, Tesla’s stock market value sprinted past Ford today, placing it in the number two spot among domestic automakers. The company, which has yet to offer a vehicle most normal Americans can afford, holds a market cap of $47.81 billion at last count.
Tesla’s stock rose more than 5 percent since today’s open, with shares nudging past the $293 mark. Over in Dearborn, Ford’s shares, valued at $11.36 at last tally, sank more than 2 percent today. The Blue Oval’s market cap sits at $44.97 billion.
The automaker’s surging share value places it within striking distance of GM, which posted a market cap of $50.81 billion early this afternoon after a nearly 4-percent slump.
We’re all familiar with the “true believer” status of many Tesla fans, and many of those owners and would-be buyers clearly have the same confidence in the company’s long-term financial performance. “The future is electric,” they chant, before handing over a slice of their investment portfolio to the Silicon Valley automaker.
There’s plenty of correlation between the buoyant stock and recent happy news for the automaker. Yesterday, the company posted a record quarter for vehicle deliveries, having produced 25,418 Model S and X vehicles in the first three months of 2017. That’s above the previous quarter’s production tally of 24,882 units. Tesla’s steady production climb, which hasn’t been without hurdles and pitfalls, bodes well for its product promises.
“Smoothness with legacy vehicles will likely allow more focus on a successful launch of the critical Model 3 vehicle later this year,” CFRA analyst Efraim Levy told Market Watch, admitting that the stock’s “rich valuation” poses a concern.
Just last week, Tesla received a vote of confidence from Chinese investment holding company Tencent Holdings. Tencent, which controls a number of subsidiaries in the fields of media, entertainment and mobile phone services, bought a 5-percent stake in Tesla on March 28. That deal carried a price tag of $1.78 billion.
As pioneers in heavier-than-air flight quickly found out, nothing stays up forever. All eyes are on Tesla’s late 2017 production start for its affordable Model 3 sedan, and any delays or problems — including initial quality concerns — could give investors cold feet. Analysts dumped on Tesla following its acquisition of solar energy giant SolarCity last year, sending the company’s stock sliding.
[Image: Tesla Motors]
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Back in the late 1990s, I heard a stock analyst proclaim that the value of a company was no longer tied to its profitability. Then, the dot com bubble burst proving the analyst wrong. A company that continually posts a loss can survive only as long as someone is willing to pump money into it to make up for those losses. If the money faucet shuts off, the company implodes as soon as its cash reserves are depleted. Amazon is not quite the same as Tesla. To begin with, a tiny profit is entirely different from a loss, especially when a company is growing its business. Much of what you can buy from Amazon actually comes from companies that market through Amazon. Those companies are profitable. Amazon has no serious internet competitors and their brick-and-mortar competitors are failing. Amazon should be able to hold out until it's the only game in town. I question whether Tesla can do that.
Both Ford and Tesla are battling it out for market leadership in vehicles that burst into flames.