Big Red Car here on a lovely Thursday in the ATX. On Earth as it is in Texas! Today, we talk valuation mojo. What?
So, the Big Red Car is ciphering about the market caps and other data of car companies. “Some interesting stuff, Big Red,” said NOBODY ever. [“Hey, I resent that,” sayeth the Big Red Car.]
So, here you have three car companies: Tesla, Ford, and General Motors. Three companies who are struggling to make a profit — or are they?
Let us begin by looking at the financial performance of Tesla, Ford, and General Motors, shall we? I like to use Market Watch for info as they have very comprehensive data.
1. Tesla — ($674MM) net loss in 2016 [Market Watch Tesla here]
2. Ford — $4.6B net income in 2016 [Market Watch Ford here]
3. General Motors — $9.43B net income in 2016 [Market Watch GM here]
Not to insult your intelligence, but both Ford and GM made money while Tesla lost money.
Let us take a look at how the stock market and investors valued each of the companies with an eye toward their financial performance noted above.
1. Tesla — $48.11B
2. Ford — $44.84B
3. General Motors — $51.23B
Whoa, hello, America — Tesla is worth $48.11B and Ford (which made a profit) is only worth $44.84B? How is that possible?
Can you tell me the names of the CEOs of Tesla, Ford, General Motors?
This is a test, but the Big Red Car will not tell you the results. Can you name them?
Unit sales — US unit sales — is another interesting data point.
1. Tesla “delivered” 76,238 units in 2016 while “producing” 83,922. They are the only car company to report and make a distinction between “delivered” and “produced.”
2. Ford sold 2,614,697 units in 2016.
3. General Motors sold 3,042,773 units in 2016.
4. As a frame of reference, Mercedes Benz sold 380,752 units in the US in 2016.
As you can see, dear reader, Tesla is a tiny company when it comes to actual units “delivered.”
So, dear reader, the question on your lips is: How does Tesla have such a high market cap when they lose money and are tiny in comparison to other American car companies and sell relatively few units annually?
And, that, dear reader, is called “valuation mojo” and the Big Red Car doesn’t have the answer to that question.
The Big Red Car is not editorializing or criticizing how the stock market or investors value Tesla or any of the other companies. The crowd and the markets usually get these things right — eventually.
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Be kind to yourself and did you love the Tarheels winning it all? Ugly on an ape sort of game, no, but liked the outcome. Thank you for indulging me.