These 2 charts show how Tesla's skyrocketing stock has become divorced from the rest of the auto industry
- Tesla is worth more than its Detroit competitors combined, despite outputting just a fraction of their production.
- The stock price — which continues to hit record highs — has perplexed investors, analysts, and even CEO Elon Musk.
- "We're struggling to play catch-up here with the valuation," one analyst put it bluntly this week.
It's hard to find a more famous — or controversial — car company than Tesla.
Helmed by the eccentric billionaire Elon Musk, the company didn't just create the first mass-produced, battery-powered electric vehicle that could drive on the highway — it also had to create its own market for them too, one that didn't exist in 2008.
And in the process, Tesla became the world's most valuable car company.
But for all the hype, even Wall Street analysts have scratched their head about how, exactly, the company became so valuable when it produces just a fraction of the cars made by its Detroit competitors like Ford, General Motors, Fiat-Chrysler, and others.
In 2020, investors have shrugged off past deadline flops, federal fraud charges, falling revenue, and inconsistent profits and have seen the stock reach record highs. Tesla is now worth nearly $300 billion compared to Ford's $26 billion, General Motors' $38 billion, and Fiat-Chrysler's $16 billion. In a single day's trading, Tesla is often able to add or subtract entire market values of its competitors from its own capitalization.
When you look at Tesla's valuation on a per-car-sold basis, that number becomes even more divorced from the rest of the auto industry. In 2019, Tesla delivered 367,656 cars to customers. For comparison's sake, Ford sold 5.4 million vehicles worldwide in the same year, while FCA delivered 4.2 million. General Motors, meanwhile, sold 2.8 million in the United States alone.
To simplify things: Tesla was worth more than $200,000 per vehicle it sold in 2019 at the year's end, compared to Ford's roughly $6,700 per vehicle sold, back-of-the-envelope calculations show. These comparisons, of course, aren't the complex valuation ratios or earnings multiples ascribed by investors, but illustrate how the stock's rise has led some on Wall Street to throw in the towel when it comes to predicting a price. "We're struggling to play catch-up here with the valuation," Morgan Stanley's Adam Jonas, one of Tesla's most well-known sell-side analysts, admitted earlier in July.
It's even perplexed Musk himself, who sent the stock sliding with a six-word tweet:
With Wall Street turning more sour on the name — the average analyst price target is now $843, according to a Bloomberg poll, or 44% below current trading prices — there's still plenty of optimism left. Day traders have poured into the stock, with tens of thousands of Robinhood users — who tend to skew much younger than other investors — buying Tesla shares in the span of a few hours on its busiest days.
"It's hard to see how competitors can catch up," said Piper Sandler's Alexander Potter as he slapped the highest ever price target, $2,322, on shares this week. "Tesla's own capacity is the biggest constraint to share gains."