Just last week, Tesla surpassed Ford Motor Company to become the second most valuable American automaker but was shy of General Motors. Now, that has utterly changed. Bloomberg reports Tesla is now the most valuable U.S. automaker as it passed GM yesterday.
GM, a company once so intertwined with the U.S. economy, slipped to the number two spot as Tesla ended the day valued $64 million more than the General. Tesla’s market capitalization climbed to $50.9 billion. It shows Tesla CEO Elon Musk’s vision of energy efficiency and electric vehicles taking over mass transportation is a better sell than GM, which has struggled to impress investors, despite launching the 2017 Chevrolet Bolt EV and Maven to redefine its approach to the auto industry.
“Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies cannot replicate,” said Alexander Potter, an analyst at Piper Jaffray Cos. “As they scramble to catch up, we think Tesla’s competitors only make themselves appear more desperate.”
However, other analysts say Tesla will eventually have to actually make money to keep its value from eroding. Tesla is on pace to lose $950 million this year, while GM expects to earn $9 billion.
“Is it fair? No, it isn’t fair,” Maryann Keller, an auto-industry consultant in Stamford, Connecticut, said. “Even if Tesla turns a profit, they will eventually have to make enough to justify this valuation.”
“The market cares more about the potential new market value of the other businesses Tesla is in than about real profits and cash flow,” another analyst, David Whiston at Morningstar Inc., said.
Tesla is now the sixth most valuable automaker globally. Analysts believe the automaker will soon take down Honda to claim the number five spot; Honda is valued at a hop, skip and jump away at $52 billion.
Comments
Yes, the competition is appearing desperate. Meanwhile Tesla, who has probably never turned a profit announced they will need be beta testing their all new Model 3 as they are so [not] desperate to compete with the already released Chevrolet Bolt.
In other news, Donald Trump is our president.
‘Merica!
Tesla Motors may be the “most valuable” but that is on paper. General Motors is more valuable in real physical and social values, such as property, buildings, equipment, and materials. Having one of the biggest workforce, and thousands of connections to suppliers with a secondary workforce made it much more valuable, such that Pres Bush gave GM the support when it was failing in a bankruptcy in 2008. The new GM grew again and recovered, saving hundred of thousands of jobs and billions in sales, especially with the new electric vehicles and the best models sold in the U.S.
TM has a fake value according to the stock sellers. If both companies were compared down to the last screw, GM is worth ten times more. And if TM failed, the loss would affect few employees but plenty of stockholders! Elon Musk will still have his other businesses to play with.
GM also has an independent dealer/service network. Tesla wants to own and operate their own network. In order to do so, they will need to issue and sell billions of dollars of new shares. The true value of an established Dealership service network, no one seems to be concerned with? However, as Tesla increases their sales, Service locations, building, property and employees will be necessary.
GM’s independent USA Dealership network may be worth well over $50 billion.
Tesla keeps issuing and selling new shares, diluting the potential profit for existing share owners. Investors don’t seem to factor this in?
The new car market continues to see more buyers for $30,000 to $45,000 SUV/Crossovers. While Tesla has targeted a Model 3 sedan? Can Tesla make a $45,000 SUV? The X base is $95,000.
The value based on market capitalization is all about perception. Using stock price as the primary metric is short sighted and is ignoring long-term trends and other risk factors. Telsa’s ‘value’ can be summed up in one word: Bubble
Well:
1) it has the earmarks of a bubble tech stock.
2) if you got in early and made some money off Tesla and are still in, be sure to see where the fire exits are in the theatre.
3) as Tesla’s market cap grows, index funds and ETFs will be forced to acknowledge that, and buy more to reflect their size. So part of what will stoke the Tesla fire will be (massive) index fund adjustments related to their increased market cap.
So if you bought early, enjoy the ride and decide when to bail. Despite that, it’s probably a slightly increased holding in your index fund – insiders know when the Russell/Idx fund adjustments dates are (I don’t, offhand), but don’t be surprised to see TSLX continue to climb, despite lack of profitability.
One option is Guggenheim’s equal-weighted ETF index – Apple, Microsoft and Exxon are weighted no more than any other.
I’m not a broker or day trader or Giant Whale (?), but part of what’s driving this is how mutual fund and ETF index funds work. Like Twitter – they have profit problems, too.
Just saying, there are more forces at work than just the TSLX fan club.
Sorry, I meant that Twitter, et al, have profit problems, not index and ETFs.
Bad sentence construction on my part.
That is smoke and mirrors. It is the emperor’s clothes.
What I can’t understand is how a company that has never had an internal combustion engine. Can get smog credits that it in turn is allowed to sell, for no other reason then to reduce the amount of money it is loosing? (talk about a bailout)!
If I remember correctly, those smog credit’s, and the sale of them (at least here in California) were created to help reduce the cost to company’s that invested into green technology’s. Allowing company’s in other industry’s the opportunity to buy these credits. Giving them more time to develop there own green tech, without being penalized by the government.
Now, I know all company’s get tax breaks for one thing or another. But for a company that had yet to start doing what it was (in business) to do, build and sell cars on it’s own dime?
https://www.google.com/search?sourceid=navclient&aq=&oq=governor+gives+tesla+tax+breaks&ie=UTF-8&rlz=1T4GIWA_enUS729US729&q=governor+gives+tesla+tax+breaks&gs_l=hp….0.0.2.29630………..0.m9oKykGq0ac&gws_rd=ssl#spf=1
Tesla is nothing more then the new “vogue company”, the old one, Apple!
Don’t buy it for a minute, they must have hired a bunch of old Worldcom accounting folks to calculate this!
Stock value is whatever people are willing to pay and not what is the actual value as Tesla is a joke as far as being a car company given that Tesla builds so few cars and how the cars become increasingly less reliable after 50,000 miles.
I sincerely hope that GM is not worried in any way about Tesla.
If you want to be in the car business, then build and sell cars at a profit. If you cannot do that – and it appears that Tesla so far is failing in that regard – then get into another business.
As far as stock value goes, any time a stock is the darling of the promoters, it will sell and climb. Once they drop the ball, the stock price will do the same…drop. At some point, investors will be getting out by the boatload and at that point Tesla will be at the end of its’ happy ride. The fall will come quickly and dramatically, just as it has with hundreds of other “darling” stocks.