Tesla Motors Inc (NASDAQ:TSLA), which is the youngest automaker in the U.S., and Ford Motor Company (NYSE:F), which is the nation’s oldest, both hit 100-week highs in their stock prices on Tuesday. Bloomberg’s Mark Clothier, Craig Trudell and Alan Ohnsman report that this is one of several signs which indicate that the auto industry in the U.S. is dramatically improving.
Signs Of An Improving Auto Industry
The recovery of the U.S. auto market has been years in the making. It’s been four years since two major U.S. automakers went bankrupt and Ford Motor Company (NYSE:F) restructured. The S&P 500 Automobiles and Components Index contains seven companies, including Ford, General Motors Company (NYSE:GM) and a number of parts manufacturers. Of the 24 different industries listed in the S&P 500, the automotive index is the best performing over the last three months, posting an increase of 21 percent.
Economists note that American auto purchases are hitting a pace that hasn’t been hit since before the recession hit. Interest rates are still historically low, and U.S. automakers are beginning to churn out more competitive vehicles. For the first time in two decades, the Detroit Three (Ford, GM and Chrysler) all posted market share gains in their home market.
Tesla Motors’ Results
Tesla Motors Inc (NASDAQ:TSLA)’s stock price has been driven by the company’s first profitable quarter earlier this year, although the company has warned that the quarter which ended in June won’t be as promising. A consensus of analysts polled by Bloomberg indicates that the company will report a loss of 17 cents per share. Tesla said its June quarter results will be greatly impacted by lower sales of California zero-emission credits.
The automaker’s market capitalization is now nearing $15 billion, and its shares are trading at more than 8,900 times its estimated 12-month earnings, according to Bloomberg data. Tesla Motors Inc (NASDAQ:TSLA)’s market cap is now bigger than that of larger automakers like Mazda and Fiat. The company will even join the NASDAQ 100 Index just three years after its initial public offering.
Concerns About Tesla’s Valuation
Many investors and analysts are concerned that Tesla Motors Inc (NASDAQ:TSLA) is extremely overvalued. Others point to the change to lease accounting, which lowers the company’s multiple quite a bit, although it is still high.