Tesla Going Head to Head with GM and Ford

Earlier in the year Tesla Inc (NASDAQ:TSLA) overtook General Motors (NYSE:GM) and Ford Motor Company (NYSE:F) as the most valuable car manufacture in the United States. For some people this was considered jaw dropping news in the automotive world. But for others it was much anticipated.

Tesla, Inc., formerly Tesla Motors, Inc., designs, develops, manufactures and sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products. The Company operates through two segments: Automotive, and Energy generation and storage. The more popular one being its automotive segment.

Amazingly, Tesla shares have risen about 38% year to date. But earlier this month at the peak of its highest point, it went up as high as 50% from the end of 2016. Although the company has a fabulous growth story, the valuation seems to be too rich from a fundamental point of view. Here are some numbers from the auto industry in the U.S.

Ford sold 17.5 million cars last year, and made $9.4 billion in profits. General Motors sold about 10 million cars during the same time, and generated profits of $4.6 billion. Meanwhile, Tesla Inc only managed to deliver 76,000 cars. Not only are the sales low, but Tesla also did not turn a profit and actually lost about $674 million for the year.

It’s apparent that many investors see a great deal of potential in Tesla. The car company has disruption written all over it and with that comes a level of high expectation. The high valuation isn’t without complete merit. Tesla did increase its sales by 300% in the past four years while sales for General Motors and Ford have hardly moved.

One product that has many people excited is Tesla’s new car, the Model 3, which is set for a 2018 release. When this comes out it’s going to put electric cars in the hands of the masses. There are currently other electric vehicles for the average consumer, but they are not as impressive as the Model S will be. Here are some stats about Tesla’s new vehicle. It will have a range of 215 miles for the base model, or 300 miles for the premium model. Acceleration from 0 miles per hour to 60 miles per hour will take six seconds for the standard model. The premium model will take only four seconds. The base Model will be US $35,000 before incentives. This puts the price in line with other electric cars on the market. Although it isn’t really cheap, it can do a lot more than the competition. Plus, Tesla’s flagship, the Model S which is faster, costs about US $75,000 for the base model. So relatively speaking the Model 3 is much more affordable.

In terms of what Tesla has in planned for the future, there’s an upcoming semi trailer that will be announced later this fall. People seem to be very split with the company and its future prospects. A lot of critics are waiting for something to go wrong with Tesla’s stock. But shorting a disruptive company can be be risky. Amazon.com received a lot of negative reports for over a decade in the beginning because it wasn’t turning a profit either. However, there are also people very optimistic about the stock and its future potential. In terms of Wall St. sentiment, it appears most analysts do not have very high hopes for Tesla. The stock is currently trading at around $300 per share. Out of 16 analysts that cover the stocks, according to Thomson Reuters, the lowest target for TSLA is $155 per share. The highest is $375 per share. And the average 12 month target is $259, which is about 15% lower than what the stock is trading at now. I would be hesitant to buy the stock at these levels.

This author does not have any shares in TSLA and does not plan to own any within 72 hours of this post.