Only two American companies have market caps of $2 trillion or more. These are Apple at $2.7 trillion and Microsoft at $2.1 trillion. The tech stock sell-off could bring these down. Another three companies have market values above $1 trillion: Alphabet at $1.6 trillion (its recent poor earnings will erode that number), Amazon at $1.5 trillion and Tesla at $1.0 trillion. Among these, Tesla has had the best stock performance in the past year. It is up 37%.
There is a strong argument that Tesla’s market cap will fall. CEO Elon Musk has spent a great deal of his time recently with a takeover of Twitter. If he is active in its management, he essentially will be running a third huge company, after Tesla and SpaceX. Investors already have begun to ask themselves whether Tesla will suffer.
The hard numbers show that Tesla is not only in great shape but is getting better. In its most recently reported quarter, vehicle deliveries reached 310, 000, an increase of 68% from the same quarter a year ago. Automotive revenue rose 87% to $16.9 billion. Net income was up 658% to $3.3 billion. Just as extraordinary as these numbers are, despite supply chain issues, the pace does not appear to be slowing. Of course, those supply chain issues eventually could undermine this.
The strongest argument for an ongoing increase in Tesla’s value is the extent to which initiatives counter challenges to its lead in electric vehicle (EV) sales. Ford recently launched the F-150 Lightning. Its primary advantage is that the F-150 has been the best-selling vehicle in the United States for four decades. Ford has said that the launch could make or break the company’s image, at least short term. It faces the risk of supply chain problems, and the question of whether Ford has mastered automotive software.
There are dozens of manufacturers behind Ford and its effort to take a share in the EV segment. This includes every major car company in the world. So far, the market has not substantially rewarded any of them for their progress.
Tesla’s other advantage is its brand. It has been described as the most valuable car brand in the world. People buy Tesla vehicles as much for the brand as the technology it has developed.
On balance, Tesla will outperform the other mega-cap stocks and continue to accelerate toward the $2 trillion level.
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