By on April 3, 2017

tesla model-s-rear

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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47 Comments on “We’re Number Two! Tesla Tramples Ford in Investor Value, Targets GM...”


  • avatar
    OldManPants

    Ponzi done right?

    • 0 avatar
      Vulpine

      Ponzi no more. Despite arguments in that direction, Tesla has proven itself capable of growing, hopefully into a mature, competitive company across the board.

  • avatar
    indi500fan

    Never been to the factory but I’ve heard they play the theme song from the Lego movie (Everything is Awesome) at start and end of shift.

    Just for kicks I looked up how many veh assy plants Ford has (32, although some are joint ventures).

  • avatar
    Whatnext

    Wow and it only took one reply to get the Tesla haters to crawl out from their rocks.

  • avatar
    Tstag

    That’s a massive bet on future sales success which I for one don’t buy. Feels like a dot com type bubble centred on one company. This market wil also get crowed very quickly. Just look at what the 3 German premium car makers are doing plus JLR in this space. Tesla will have a lot of competition very soon. Still Toyota invested at the right time.

    • 0 avatar
      JimZ

      the difference is Tesla has a story, and an (Apple-like) devoted fan base. People who will wait until doomsday for a Model 3 instead of buying a Bolt which is available right now.

      • 0 avatar
        ByTheLake

        At some point Tesla will have to make a profit off its car business. A passionate fan base is great, but if you’re losing money on every vehicle, that will catch up, especially as more companies get into the luxury EV business.

        • 0 avatar
          SCE to AUX

          Tesla started in the ‘luxury EV business’ because it’s actually easier to do that.

          The goal all along has been to succeed in the mainstream EV business. The primary edges they’re trying to get are lower cost mfg processes, including reduced labor content, but especially reduced battery costs, thanks to the Gigafactory.

          But if those tactics don’t work, it’s a real problem for Tesla but also for the future of electric vehicles.

  • avatar
    tresmonos

    I’m torn. On one hand, you have and old school industrial who has more global leveraging but an enormous scale that still employs a larger number of Americans as well as props up the infrastructure that Tesla depends on in the supply base, yet on the other you have an extremely vertically integrated small scale producer with a higher % of domestic designers and manufacturing employees that is producing high end niche performance vehicles.

    I want to take both pills – red and blue – fight the system yet maintain my overvalued retirement portfolio based on some junk speculation because ‘there is nothing new’ to give investors the boom they got in the nineties.
    But what do I know? I’m just a god damned dumb @ss.

  • avatar
    JimZ

    I don’t like people gloating about market cap. yes, it’s essentially the “cash value” of the company (e.g. if you moved to buy it) but that “value” can drop like a rock with one wrong tweet from Elon.

    It’s not like it doesn’t happen.

    http://money.cnn.com/2017/04/03/investing/apple-imagination-technologies-stock/

    over 70% drop in share price in one day. All that market cap evaporated in an instant.

  • avatar
    Felix Hoenikker

    The bubble grows with this one. But then again, look at the market cap of Uber which is nothing more than a payment processor hooked up to some fancy dispatching software.

  • avatar
    dash riprock

    “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.”

    Tencent stated that their investment in Tesla has a average cost of $217/share. So while they may have participated in the recent stock issuance, the majority of their 5% came at a much lower price.

    Musk has done a great job in creating a brand. He has done an even better job of creating myths surrounding the company. This is not a technology company(over 90% of revenue comes from auto manufacturing)even if the stock is behaving like one, it is not a start up unless a 15 + year old firm qualifies. It is a company that bleeds red ink with no sign of that changing. It depends on consistent infusions of capital to keep going. Now, they will be facing an onslaught of competition from established automakers with healthy profits to fund R&D and capital investments. These companies will have the ongoing profits to shore up any losses on the BEV side.

    How Tesla survives as an independent automaker is the question.

    • 0 avatar
      dash riprock

      “Despite generous debt, tight timelines and razor-thin profitability,”

      Missed the “razor-thin profitability” laugher

      Dividend: N/A
      Div. Frequency: N/A
      Shares Out.: 163,206,687
      P/E Ratio: N/A
      EPS: -4.820000

      How does the author see a loss per share of $4.82 as profitability? Even the razor thin kind?

      Yikes.

      • 0 avatar
        Master Baiter

        “How does the author see a loss per share of $4.82 as profitability? Even the razor thin kind?”

        Musk is following the Jeff Bezos model of how to become wildly rich without making a profit. See my post below on Amazon.
        .
        .

        • 0 avatar
          indi500fan

          Impressive isn’t it? Musk is trolling the stock shorts on Tweater. I don’t have a clue how all this works.

          At least Amazon is building up a ginormous customer base and infrastructure.

          Musk is selling (worldwide) in a QUARTER 11% of what Ford (USA) is selling in a MONTH. And a big slug of those Fords are nicely profitable pickups and SUVs.

          • 0 avatar
            hgrunt

            You could count the supercharger network and the gigafactory as infrastructure though.

            The second Master Plan also includes a push into the commercial vehicle market, so they’re probably looking beyond passenger cars as well.

        • 0 avatar
          orenwolf

          Got it in one, sir.

        • 0 avatar
          dash riprock

          Actually I believe that Musk is outdoing Bezos. Amazon’s growth is mostly funded from cash flow, Tesla has negative cash flow and as such relies on other people to continue to add cash.

    • 0 avatar
      Lou_BC

      Tencent Holdings – sounds like a Rapper

  • avatar
    whitworth

    Even if you’re some wild fanboy of Tesla’s products, who on Earth thinks as a company it’s a wise investment?

    My guess is after the Model 3 comes out, the house of cards will tumble.

    • 0 avatar
      stuki

      Like others have pointed out, it’s not really much worse of an investment than Uber and many others.

      All stock investments at current valuations, are largely a bet that the Fed will succeed in indefinitely transferring an ever larger share of America’s output from those who need to buy things, to those who can afford to buy paper.

      • 0 avatar
        whitworth

        Pointing out another company that could also be widely overvalued is not exactly a rebuttal.

        I honestly like Uber’s chances long term WAY better than Tesla.

        Especially since every luxury car company is going to have at least one electric car in their lineup in the very near future.

        • 0 avatar
          stuki

          The long term chances of a barber shop or family farm is likely higher than both. The problem with Uber is, where is the upside? It was (still is, as they are the best at it) a brilliant idea. But, it’s an app. Where both drivers and passengers have every reason to bolt for lower spread competitors as the service becomes increasingly commoditized. Amazon (Or Costco, or Apple) could include a lower, heck even no-, spread version as part of their Prime subscription, and half Uber’s customers and drivers would slowly start shifting over… Replacing a ridiculously expensive, rent seeking intermediary, with a somewhat cheaper and less rent seeking one, is nice and all. But the latter rarely ends up being a new, stable equilibrium. And, assuming quaint, old fashioned metrics for valuing future income streams, Uber is very dependent on fairly high and steady rents to justify their share price.

    • 0 avatar
      JimZ

      Their stock price/market cap is a result of investors seeing growth in their future. Prior to the Bolt, none of the existing automakers were doing what they’re doing. Tesla can grow. Everyone else can only steal a few points of marketshare from each other every quarter.

  • avatar
    Oberkanone

    List of defunct automobile manufacturers and technology companies is quite impressive. Tesla may be a giga-money pit.

  • avatar
    Master Baiter

    “…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…”

    Wow. That’s a whopping 2% annualized growth rate.

    And Jeff Bezos is now worth $76 billion. His company’s total cumulative profit since inception is under $5 billion.
    .
    .

    • 0 avatar
      indi500fan

      I think they took some production time down for install on the Model 3 tooling. Not sure how much.

    • 0 avatar
      JMII

      I think for both companies its all about the future. Take Amazon: Seems almost every day another normal (Sears, KMart, JC Penny, even Macys) brick-and-mortar store closes a location as cheap and easy online purchasing captures more customers. Sure Amazon doesn’t make much (if any) money now, but they are growing a huge customer base with a new buying experience. Thus many years from now when the last profitable company goes out of business trying to fight them, Amazon can cash in. They will have all the customers and almost no competition.

      Similar for Tesla. At some point when the current advantage of gasoline runs out (IE: the price goes sky high) Tesla will be the established go-to solution. Also Musk is like a real life Iron Man in his ventures, the guy is RE-using rockets to send things into space. He wants people to travel at 600 MPH in tubes like on the Jetsons! So what if he hasn’t figured out how to make tons of money yet… his ideas are clearly future focused. What is Ford doing in comparison? Oh that’s right they have a camera system that makes reversing with a trailer easier. Pretty lame compared to what a Tesla can do (if you can afford one that is).

      • 0 avatar
        stuki

        I want people to be teleported. 600mph is slowpoke style! I guess that makes me even more future oriented than Musk. Perhaps because I’m one of those boring old guys who never did see much value in Divine Interventures, I’d still be skeptical about valuing any car company I started at $50 billion.

      • 0 avatar
        Vulpine

        @JMII: If you think about it, Sears was one of the original “internet” operators, noting that the “internet” at the time was the Pony Express and they used a honkin’ thick catalog for mail order. Were Sears Roebuck and Co. under the control of the original founders, I’m betting they’d be making a killing off of the internet today, selling anything and everything just like they did back then. Even Amazon falls short when you consider many of the things Sears used to sell.

    • 0 avatar
      JimZ

      keep in mind that a lot of the “net worth” of these billionaires is tied up in the stock prices of their investments. Bill Gates is not sitting on $87bn of cash. Jeff Bezos is not sitting on $76bn of cash. if either of them tried to “cash in” all at once, their net worth would drop immediately due to the flood of selling.

  • avatar
    SCE to AUX

    Tesla is now too big to fail.

    • 0 avatar
      indi500fan

      How do Musk and Trump get along?

      I assume his anti-UAW stance makes him pretty toxic to Democrats.

      • 0 avatar
        SCE to AUX

        Mr Musk has already visited the Trump White House several times, which I guess means they’re on decent terms.

        But I suspect a future foundering Tesla would rely more on private bailouts than public ones. The True Believers would inject even more money.

        • 0 avatar
          mcs

          “But I suspect a future foundering Tesla would rely more on private bailouts than public ones.”

          and/or SpaceX profits garnered from launch fees. At some point, I could see Musk doing a bit of consolidation.

          • 0 avatar
            JimZ

            “and/or SpaceX profits garnered from launch fees.”

            Tesla and SpaceX are separate companies. wouldn’t mixing funds between the two be several levels of illegal?

  • avatar
    dougjp

    Its fun watching fools part with their money. Same goes for cult members walking off a cliff. Where’s my popcorn?

  • avatar
    stingray65

    This “new economy” stock valuation model is amazing. Uber, AirBnB, and Tesla have never earned a nickel in profit and yet have valuations that are far above establishment competitors that actually earn profits. Amazon margins are about 1%, but their market cap is higher than Walmart that earns 3.5%. Seem like good safe investments for widows and orphans to put their trust funds.

  • avatar
    thenerdishere

    Toys for rich people willing to pay a premium. Since the last several administrations have successfully killed off most of the middle class, the businesses that cater to the middle class are doomed too, including mass-market car companies.

    Say what you want, but there are a lot of smart people in finance and they know that the middle class is effectively dead.

  • avatar
    Kendahl

    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.

    I’m a fan of Musk’s SpaceX operation. He is doing privately what NASA, adequately funded by tax dollars, should be doing. Anyone who doesn’t remember or has never seen the movie 2001: A Space Odyssey should dig up a copy and watch it. Make note of the things Kubrick and Clarke expected to be in place 30 years after the movie was released — a commercial, rotating ring space station, civilian passenger service between it and Earth, a permanent station on the moon and the capability to mount a manned expedition to the vicinity of Jupiter. What we have is a small research station with no gravity, reliant on Russian rockets for support, and no capability to return to the moon, much less go to Jupiter. Musk and some equally farsighted competitors are trying to fix that.

  • avatar
    Kendahl

    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.

  • avatar
    jimmyy

    Both Ford and Tesla are battling it out for market leadership in vehicles that burst into flames.

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