Tesla Motors Inc (TSLA) v/s General Motors Company (GM): Who Will Win the Valuation Game?


The rise in Tesla Motors Inc (NASDAQ:TSLA)’s stock price, especially in comparison to other car manufacturers like General Motors Company (NYSE:GM) has been so profound, many believe it will overtake the Detroit biggies soon. In the almost four-year period that Tesla Motors Inc (NASDAQ:TSLA) has been a public company, its stock has seen a tenfold increase, while in the same period  General Motors Company(NYSE:GM)’s stock is exactly where it was.  So, can Tesla Motors Inc (NASDAQ:TSLA) beat General Motors Company (NYSE:GM) in the market cap game?

Tesla, is TSLA a good stock to buy, Senator Ted Gaines, California, Gigafactory

Tesla Motors Inc (NASDAQ:TSLA)’s last closing price was $269.70, making it a $33.61 billion market cap company. General Motors Company (NYSE:GM)’s stock closed at $34.80, which gives it a market cap of $55.48 billion. If GM’s stock remains at nearly the same level, Tesla Motors Inc (NASDAQ:TSLA)’s stock will have to trade somewhere around $458 to bridge the 65% market cap gap, but it’s not as simple as that.

Whereas General Motors Company (NYSE:GM) sold nearly 9.7 million vehicles across the world last year for its $55.48 billion valuation, Tesla Motors Inc (NASDAQ:TSLA) sold barely 10,000 cars. Lets also not forget that General Motors Company (NYSE:GM)’s last year revenues were $155 billion, while Tesla Motors Inc (NASDAQ:TSLA)’s revenues were only $2 billion.

The reason behind the stark difference in valuations of General Motors Company (NYSE:GM)’s and Tesla Motors Inc (NASDAQ:TSLA) lies in perception. The Street considers GM as a ‘has been’ now, while Tesla Motors Inc (NASDAQ:TSLA) is being considered as the future of the automotive industry. For Tesla Motors Inc (NASDAQ:TSLA) to overtake General Motors Company (NYSE:GM), or for that matter even enjoy the valuation that it does today, it will need to turn that perception into reality. With every auto maker in the world now taking electric vehicles seriously, Tesla Motors Inc (NASDAQ:TSLA)’s road won’t be easy and the choices that the company makes in the future will decide if it can overtake General Motors Company (NYSE:GM) or not.

As of June 30, 2014, Daniel Benton‘s Andor Capital Management owns over 1.25 million shares in Tesla Motors Inc (NASDAQ:TSLA) and Warren Buffett‘s Berkshire Hathaway owns over 32 million shares in  General Motors Company (NYSE:GM).

Disclosure: None

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