USA TODAY International Edition
Why Tesla shares behave like tech
391% price surge this year doesn’t reflect traditional automaker valuation.
Tesla Motors’ spectacular stock price climb has led to a milestone that divides analysts on the nature of the company itself.
Should Tesla be considered an automaker, a tech company — or both? It makes a high- end electric luxury car, but lately its stock has behaved as if it belongs alongside Google, Apple or Amazon.
Tesla shares closed Wednesday at $ 166.45, cementing a 391% price gain this year. This week, the company’s market value passed the $ 20 billion milestone.
At that level, Tesla is now valued at almost half of the value of General Motors and a third of Ford. And it left Chrysler, and its parent Fiat, in the valuation rearview mirror months ago.
These are the kind of stock gains reserved for tech companies, not industrial automakers. So what is Tesla? CEO Elon Musk described Tesla as “an automotive technology company” in an interview with CNBC last week. He called the stock price runup “more than we have a right to deserve.”
Some analysts agree. “Tesla doesn’t reflect the traditional automaker stock valuation for the same reason that Amazon. com isn’t valued in the same way as a traditional bookseller,” says Andrea James, senior research analyst for Dougherty & Co., based in Minneapolis.
But while noting Tesla is a “new breed” of automaker unsaddled by outdated factories or expensive labor contracts, John O’Dell, analyst for car buying website Edmunds. com, says, “In the long run, it’s going to have to be judged as an auto company.”
Tesla expects to deliver 21,000 Model S sedans this year at prices that start at $ 71,070, including shipping and before tax rebates for which a buyer might qualify. But that production level is peanuts compared with the output of major automakers.
GM has sold 1.6 million cars in the U. S. alone for the first seven months of the year. But its market cap is about $ 46.6 billion.
Ford, long considered the most financially healthy of Detroit’s Big 3 and seller of 1.5 million vehicles in the U. S. through July, has a market cap that’s triple Tesla’s, at about $ 62.6 billion.
Fiat, which controls Chrysler, is valued at $ 9.4 billion.
Tesla “is not an automobile company,” says Trip Chowdhry, analyst for Global Equities Research. “It is a new category.”