Will Tesla Become More Valuable Than Ford?

By Douglas A. McIntyre Updated Jan 12, 2:42PM EST · Published Feb 18, 9:55AM EST

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Will Tesla Become More Valuable Than Ford? — © Thinkstock

[cnxvideo id=”550173″ placement=”ros”]Tesla Inc. (NASDAQ: TSLA) trades near an all-time high of $280. With earnings upcoming next week, strong results could make its shares surge again. Its market cap of nearly $44 billion is only slightly below the market cap of Ford Motor Co. (NYSE: F), one of the world’s largest car companies, which sits at $49.5 billion.

Earlier this week, 24/7 Wall St. assessed the value of the two companies. The contrast in size between the two is massive. Tesla barely produced 83,000 cars last year. Ford produced over 6.6 million. Even if Tesla hits its near-term forecasts, its production will barely top 500,000 in two years.

Tesla claims it is on the cutting edge of not just electric cars, but also self-driving vehicles. Ford last year announced it would invest $1 billion in Argo AI, a venture that also includes Uber and Google. This is only one Ford initiative. Last year Ford said it would build autonomous cars for ride sharing and that production levels would be significant. As it made this announcement, management said:

This year, Ford will triple its autonomous vehicle test fleet to be the largest test fleet of any automaker – bringing the number to about 30 self-driving Fusion Hybrid sedans on the roads in California, Arizona and Michigan, with plans to triple it again next year.

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If the world of self-driving and autonomous cars comes as quickly as optimistic experts suggest, Ford has two problems. The first is that the electric car and self-driving car sectors are crowded with at least two dozen major start-ups and every large car company in the world. There is not a single guarantee Ford will be in the vanguard of this work. If not, it will have spent billions of dollars and not taken a leader’s position.

Ironically, Ford’s other problem may be its legacy business, which is the development, production and sales of those 6.6 million cars. The vast majority of them are gasoline driven and configured to be driven by humans. Reconfiguring a company for the future, when it is as big as Ford, may be nearly impossible.

Tesla maybe overvalued. There is certainly a case to be made that is true. However, its stock price was about what it is today in both August 2014 and June 2015. Its market cap level is “resilient.”

Ford’s stock price story is less attractive by a wide margin. Over the past two years its stock has fallen 23% to $12.50. Over the same period, Tesla’s has risen 32% to $269. The S&P 500 is up 11% in that time.

The Tesla and Ford market cap gap is not a fluke.

Also look for the 24/7 Wall St. analysis of why shares of Tesla could sell off.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.