For Tesla fans, the world is looking very bright. The electric vehicle company — usually notorious for failing to meet deadlines — actually hit its second-quarter goal and delivered 25,000 EVs to overhyped customers.
And the market rewarded it.
On Monday, Tesla’s share price shot upward by 6% — a surge that allowed it to beat out rival company Ford.
Today, Tesla’s stock is still climbing. They pushed past GM this morning. That means that Tesla is now the most valuable automaker in the U.S.
Turns out the second-quarter delivery report was all investors needed to snap up Tesla stock, which skyrocketed to an all-time high of $294.15.
But it is hard to believe that a fledgling company (Tesla is now edging toward 14 years old) could dispatch a 100-year-old automobile titan.
And even though the stock prices speak in Tesla’s favor, experienced investors are wondering whether Ford is still the safer bet.
Tesla is Not a Car Company
In the chart above, you see Tesla and Ford’s stock battle. In 2016, things were fairly level. 2017 has been more turbulent, with Tesla soaring while Ford falters.
But I don’t know if I would call it a fair fight — investors have been bearish on automakers for a while now. But Ford is weathering the storm. The company stands to benefit from Trump’s EPA emissions standard rollback. It also plans to save $3 billion annually through 2018 with cost-cutting programs.
In short, Ford is an exceptional company — it has consistently demonstrated the ability to produce long-term profits. And it is adaptive, a strength it demonstrated when it dropped a billion dollars on artificial intelligence startup Argo AI. The move was bold and assured the automaker a top spot in the self-driving car race.
And even if investors dismiss Ford because of falling stock price, they are still missing one crucial point: Tesla is not the savior of cars. In fact, it is barely a car company.
Elon Musk’s wild success is something out of a ’60s drug dream. Tesla has managed to exist outside of market expectations, collecting cult investors who support it no matter how rocky things get.
Musk wants to populate the roads with EVs — an admirable, environmentally sound dream that investors want to buy into.
And people have bought into it.
They ignore that Tesla’s stock is overvalued. They ignore that the company consistently misses earnings and sales goals.
They can ignore all of this because Tesla is fully dependent on the charismatic dreams of its savvy, dreamer founder Elon Musk.
I am a fan of Tesla. But even I have become wary of the company. I only hope that it can back Musk’s noble ambitions with market success.
But, at the end of the day, Musk’s dreams may not be as profitable as Ford’s churning production line. And that is something investors should prepare for.
Despite the stock market, Ford is still a titan, and Tesla is still fledgling. Investors need to wait for Tesla to continue to hit deadlines — like its second-quarter delivery goals — before they go all in.
A Note on Ford: Keep in mind, we may watch Ford surge to the top again sometime soon. The automaker reported strong sales growth in November — sales growth that is set to continue with an improving economy. As always, Ford remains a good bet for income investors, consistently paying out its 4.9% dividend.
We are also anticipating the release of a few new cars and updated vehicles. The full-sized Ford Expedition and Lincoln Navigator SUV will hit the market in 2017. Both vehicles have not received updates in over a decade. We will also see a new Ford Bronco. And investors are paying attention. Ford could potentially recapture the SUV market from GM with these updates.
