Tesla tops GM’s market value, investors see Musk as future
A week after topping Ford Motor Co., Tesla climbed 3.3 percent Monday, lifting its market capitalisation to $50.9 billion. The electric-car maker ended the day valued at about $64 million more than GM. Musk’s company is now within $1 billion of Honda Motor Co. and cracking the top-five automakers worldwide.
The turnabout shows the extent to which investors have bought into Musk’s vision that electric vehicles will eventually rule the road. While GM has beat Tesla to market with a plug-in Chevrolet Bolt with a price and range similar to what Musk has promised for his Model 3 sedan coming later this year, the more than century-old company has failed to match the enthusiasm drummed up by its much smaller and rarely profitable U.S. peer.
An analyst at Piper Jaffray Cos, Alexander Potter, said: “Tesla engenders optimism, freedom, defiance, and a host of other emotions that in our view, other companies cannot replicate, who upgraded the stock Monday after owning a Tesla for seven months and meeting with management. As they scramble to catch up, we think Tesla’s competitors only make themselves appear more desperate.”
Tesla’s usurping of GM and Ford will undoubtedly spur debate over the relative value of Musk’s company compared with some of the world’s top-selling automakers. GM expects to earn more than $9 billion this year, and analysts predict Ford will generate adjusted profit of about $6.3 billion. On that basis, Tesla is expected to lose more than $950 million.
“Cash flow should determine what the value of a company is and our cash flow has been pretty good lately. At the end of the day, we run the business to serve our customers,” Ford’s president of the Americas, Joe Hinrichs said.
For now, Tesla ranks the sixth-biggest carmaker by market cap, behind Toyota Motor Corp., Daimler AG, Volkswagen AG, BMW AG and Honda. Although CEO Musk has a long way to go to match Toyota’s $172 billion market cap, Honda is barely ahead at about $52 billion.
“The market cares more about the potential new market value of the other businesses Tesla is in than about real profits and cash flow. Right now there is nothing to slow Tesla’s momentum. They could pass Honda, too,” an analyst at Morningstar Inc David Whiston, said.
Tesla has long been treated like a technology stock with investors betting on its ability to dominate a market for electric cars and energy storage. To those same investors, GM and Ford are headed for a slowdown in car sales that will erode profits.
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