24/7 Wall St. Insights
- Ford Motor Co. (NYSE: F) and Tesla Inc. (NASDAQ: TSLA) have reversed Wall Street’s opinions in just a few months.
- One stock is in retreat and the other easily outperformed the S&P 500.
- Also: Dividend legends to hold forever.
Tesla Inc. (NASDAQ: TSLA) was supposed to have a bad year because the electric vehicle (EV) market became more crowded and EV sales slowed in every major market except China. On the other hand, Ford Motor Co. (NYSE: F) had reasserted itself as a profitable maker of popular gasoline-powered cars and slowed costly EV investments. The stock market sees the story differently.
In the past three months, Tesla’s stock has increased 37%, Ford’s is down 14%, and the S&P 500 is up 5%. Tesla’s “robotaxi” is coming next month. Ford disappointed investors with earnings for the most recently reported quarter.
Tesla vs. Ford
The Ford problem is easy to understand. Its revenue in the most recently reported quarter was above expectations at $44.8 billion, and per-share earnings were $0.47 against expectations of $0.68. The primary cause of Ford’s problem was warranty costs. Ford promised for the past two years it would solve quality issues, but Wall Street became impatient. Ford also recently started to retreat from its $30 billion EV program, which investors generally believed was a good decision but not enough to offset the warranty news.
Low expectations may have helped Tesla. Its most recently released quarterly sales and production numbers show that its growth had flattened. In the second quarter, it produced 411,000 vehicles and delivered 444,000. Tesla’s period of rapid growth seemed to be over.
However, investors discovered that Tesla has held 49% of the EV market share in the United States this year. The fear that legacy car makers were eroding it was not valid. Then, sales in China, the world’s largest EV market, were strong. Investors began to believe Tesla was on a growth path again. “This China strength comes at a very opportune time for Tesla, helping to offset ongoing weakness in the US and Europe,” Dan Levy told CNBC. He expects Tesla to deliver 470,000 vehicles worldwide in the third quarter, which would be a record.
If the robotaxi is truly a self-driving vehicle, Tesla would have done something no company in the industry has done. So far, self-driving cars require the driver to assist the system. The industry has been working on a completely autonomous vehicle for years. No company has been able to break through.
Ford and Tesla have reversed Wall Street’s opinions in just a few months.
Three Warning Signs Ford Is in Trouble
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