Investors are now considering Tesla Motors Inc (NASDAQ:TSLA) a totally different breed of automaker with shares of the electric vehicle company gaining five-fold this year, and trading at around 100 times the expected 2014 earnings. Investors see a bright future for Tesla, expecting the company to become a “mass market” seller, and giving some serious competition to players like Ford Motor Company(NYSE:F) and General Motors Company(NYSE:GM).
However, a report from Kiplinger by David Milstead suggests that Tesla Motors Inc (NASDAQ:TSLA)’s bright future forecast may distract investors from a bright present for both Ford and GM, “whose shares are available on much more reasonable terms.”
ValueWalk's Raul Panganiban interviews Dr. Kathryn Kaminski, Chief Research Strategist at AlphaSimplex, and discuss her approach to investing and the trends she is seeing in regards to quant investing and hedge funds. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with AlphaSimplex's Read More
Ford a robust player
Ford, which had weathered the crisis without a government bailout, is considered as a robust player with strong margins and solid product line. The automaker currently trades around $17.31, which is 10 times the expected earnings for the coming four quarters. Morgan Stanley analyst Adam Jonas believe that if U.S. auto sales improved to 18 million by 2015, against expected 15 million this year, then Ford will be in a good position to expand the market share helping the stock to hit $27 by mid-2014.
GM on a growth path
GM, on the other hand, has some problems primarily due to its exposure to European countries. The company currently trades at $36.48, which is 8 times the estimated earnings for the year ahead. Analyst Itay Michaeli of Citigroup Global Markets believes that things are improving for GM and sales of its pickup trucks look promising. Michaeli has a Buy rating on GM with a one year price target of $45; he also suggests the OnStar service gives GM a technological edge as more cars are equipped for internet access.
Tesla overshadowing Ford, GM
Wall Street is currently valuing Tesla Motors Inc (NASDAQ:TSLA) based on it being the future of auto making, but this report suggests the outlook is better for veteran players. Presently, the market value for Tesla is around $20 billion compared to $68 billion for Ford and $50 billion for GM. If we look at the sales numbers, both Ford and GM sell around ten times more cars in August than Tesla sells in a year.
During a recent unprecedented run on Tesla Motors Inc (NASDAQ:TSLA)’s stock, recent performance of Ford and GM shares have been completely overlooked. Over the past year, Ford shares have gained 71 percent while GM has been up 56 percent. And even at these levels, shares of both Ford and GM look inexpensive from an investing point of view.