Tesla Hits All-Time High, Passes Ford in Market Cap

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Tesla Hits All-Time High, Passes Ford in Market Cap

By Rakesh Sharma | April 3, 2017 — 7:14 PM EDT

Call it a symbolic change of the guard, if you will. Tesla, Inc. (TSLA), which kick started the electric car revolution, passed Ford Motor Company (F), a company that pioneered the car revolution in the United States, in market value today.

At the end of trading, Tesla’s share price was $298.52, an increase of 7.27 percent since the day’s start. That bump brought its total market capitalization to $48.63 billion, making it the second biggest automotive stock in the markets. Only General Motors Company (GM) is ranked higher. In comparison, Ford’s stock price declined by 1.7 percent to $11.44, and its total market capitalization declined to to $45.4 billion. (See also: Elon Musk Mocks Short Sellers After Tesla Stock Surge.)

Tesla’s stock price shot up after the company reported record deliveries of 25,000 vehicles during its first quarter. Investors were enthused by the announcement, as it means that the company is on track to deliver 50,000 vehicles during the first half of this year. In contrast, Ford was hit by an overall decline in passenger car sales in the country and reported a 7.2 percent decline in sales of its cars. (See also: Tesla Reports Record Deliveries in the First Quarter.)

A Wall Street Journal report about Tesla’s soaring stock price draws another parallel between the two companies. Henry Ford was 45 – the current age of Tesla CEO Elon Musk – when he released the Model T, the common man’s car. Musk is scheduled to release the Model 3, an affordable electric car priced at $35,000, later this year. Musk is also said to have cheekily named Tesla’s sedan Model S because the letter S comes before T in the alphabet. (See also: Elon Musk Biography.)

But the stock market’s valuation for both companies is not reflective of the scale of their operations or profits. For example, Ford reported profits of $10.4 billion last year and had a positive cash flow of $6.4 billion. Meanwhile, Tesla reported losses of $773 million and had negative cash flow. Ford delivered 6.6 million vehicles last year, while Tesla delivered 76,000. (See also: Tesla’s Stock Drops on Missed Delivery Forecast.)

However, the market’s assessment of Tesla is based on the electric car maker’s future prospects. Volatility in global oil prices combined with the threat of global warming has resulted in a surge of interest in renewable energy products. Cities and countries have passed legislation that mandates increased penetration for electric cars and solar products. Tesla is well positioned to take advantage of this rapidly expanding market. The company acquired solar panel maker SolarCity Corporation to provide a full stack of renewable energy solutions from solar panels to storage facilities and electric cars to customers.

That, at least, is Tesla CEO Elon Musk’s vision. A critical litmus test for that vision will occur this summer, when the company starts production on its first mass-market electric car, the Model 3. The company is already facing the prospect of a workers’ strike and has weathered criticism from naysayers regarding its capital raise to expand production facilities. But a successful Model 3 debut will ensure Musk’s place in the history books – right next to Henry Ford. (See also: Tesla Model 3 Could Become Safest Car on Road.)
Published at Mon, 03 Apr 2017 23:14:00 +0000

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