Tesla, Inc. (NYSE: TSLA) shares have had an extraordinary run. It is the 20th most valuable company in America based on market capitalization. With its stock at an all-time high, the figure is $224 billion. It has raced by AT&T Inc. (NYSE: T) and Netflix, Inc. (NASDAQ: NFLX). Its value sits just shy of Verizon Communications Inc (NYSE: VZ), the largest telecommunications company in America. Verizon’s market cap is $226 billion.

To give some sense of how large Verizon is, the company’s revenue last year was $132 billion. Its net income was $19.3 billion. It has 152 million wireless subscribers. It also owns Yahoo and AOL, two of the largest internet portals in America.

There are two primary differences between the two companies. The first is obviously size.

Tesla had revenue of $6 billion in the first quarter, which is up 32% from the same period a year ago. Of that, $5.1 billion was from automotive operations. Net income was a mere $16 million. If its revenue accelerates at a similar rate for the balance of the year, automotive revenue may reach $25 billion. The COVID-19 pandemic could push that number much lower, though.

Tesla built 102,672 cars in the period, 33% higher year over year. It delivered 88,496 cars. Perhaps Tesla’s deliveries may reach 350,000 this year. Once again, the pandemic could shave that down.  These contrast to Volkswagen, the world’s largest carmaker by unit sales, which reached 10.97 million last year.

The other is the trajectory of stock price. Over the last year, Tesla’s is up 414%. Verizon’s is down 6%.

From the standpoint of business size, the scale weighs extremely heavily in Verizon’s favor. It is impossible to believe that Tesla could match its revenue within the next several years. Tesla’s unit sales might drop. Verizon’s wireless numbers are unlikely to move more than a few percentage points in the foreseeable future. And, the pandemic is not likely to cause a large number of people to cancel wireless subscriptions. They are too essential to the day to day lives of most Americans.

The argument on behalf of Tesla’s market cap is that the company is the wave of the future in the car industry. It is hard to claim that Verizon’s business is stuck in the past. The introduction of ultrafast 5G networks will put Verizon on the cutting edge of how Americans communicate.

A look at the two companies is enough to increase the questions about Tesla’s value, particularly if it cannot hold its place as the world’s premier electric car company.

 

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