24/7 Wall St. Insights
- Tesla Inc. (NASDAQ: TSLA) shares are up handily this year while Ford Motor Co. (NYSE: F) stock is in retreat.
- Now Tesla’s market cap is 23 times that of Ford.
- Also: Dividend legends to hold forever.
Tesla Inc. (NASDAQ: TSLA) shares surged well over 20% last week after the presidential election. CEO Elon Musk has a close relationship with Donald Trump. Still, it is unclear why that would cause a rise in valuation rather than its financial performance and the self-driving car it has introduced. Tesla’s market cap has surged to over $1 trillion. As Tesla’s shares have risen 25% for the year, Ford’s are down 10%. Tesla’s market cap is 23 times that of Ford.
Financial results only partially tell the market cap story. For the third quarter, Tesla produced approximately 470,000 vehicles and delivered about 463,000. Tesla’s revenue rose 8% to $25.2 billion. However, auto revenue was up only 2% to $20 billion. Per-share earnings for the company rose 17% to $0.72. The numbers were not impressive.
Tesla continues to face challenges. For the first time this year, its electric vehicle (EV) market share in the United States slipped below 50%. Its competition in China jumped as local manufacturers, led by BYD, post rising sales month after month. There is a worry that these Chinese companies will eventually move into the United States and European Union. Today that is blocked by tariffs, which gives Tesla a measure of protection.
Ford’s results have been highly disappointing. The number two U.S. car company loses over $1 billion a quarter in its EV business. In October, its EV sales fell compared with the same month a year ago. Ford’s warranty costs have hit earnings by hundreds of millions of dollars each quarter, although Ford will not give an exact number.
Ford is also a captive of its only real success. Its F-150 gasoline-powered full-size pickup has been the best-selling vehicle in the United States for four decades, but it accounts for 38% of Ford’s U.S. sales. Ford is a company with U.S. revenue built on one pillar.
Is Musk’s relationship with Trump the reason for the considerable difference in the market cap between Ford and Tesla? To some extent, yes. However, Ford’s fumbles are just as critical a reason.
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