April 13, 2017
There's no denying that Tesla, Inc. (TSLA) shares have been on an absolute tear so far this year, especially in comparison to other automakers. In fact, while TSLA has surged 39% year-to-date, Ford Motor Company (F) and General Motors (GM) have declined 7% and 3%, respectively. And as a result, the big headline recently was that Ford is now worth less than Tesla.
The two big American automakers have been hit particularly hard in April, following disappointing vehicle sales in March. Vehicle sales fell to a two-year low, a 16.82 million annual pace last month, which was down 4.3% from February's 17.58 million annual pace. Used car prices have fallen dramatically and are apparently weighing on new car sales.
Ford revealed that it sold 236,250 vehicles in the U.S. last month, which represented a 7.3% year-over-year decline. General Motors actually posted a 1.6% increase in vehicle sales in March, selling 256,224 vehicles, but that fell short of analysts' estimates. And Fiat Chrysler (FCAU) reported a 4.6% decline, as vehicle sales dropped to 190,254.
On the other hand, demand for Tesla's vehicles has been red-hot this year. While the company doesn't report monthly vehicle sales, Tesla noted that it sold more than 25,000 vehicles globally in the first quarter. That's a stunning 69% year-over-year increase! Following these announcements last week, Tesla's market cap briefly crossed above both Ford and General Motors' market caps.
Now, before you get too excited and load up on Tesla shares, let me be clear about a couple things. First, while Tesla's shares are surging, the company's first mass market vehicle, the Model 3 (to begin delivery in July), is not expected to have the profit margins of its other vehicles. So it is widely anticipated that the Chevrolet Bolt will beat the Model 3 in the marketplace.
Second, when Tesla has made money, it has been largely from selling tax credits, not its vehicles. So with Solar City now burning a lot of Tesla's cash, it is highly questionable whether the Model 3 can actually make Tesla profitable anytime soon.
Considering this, and given the fact that I'm a numbers guy and require impressive earnings and sales results from my stocks each quarter, I'm not jumping on the Tesla bandwagon.
Now, if Tesla's Model 3 can outsell the Chevrolet Bolt, I will take it all back and apologize. But right now, I do not recommend investing in Tesla. Competition is emerging fast from Chevrolet and other major car companies. Specifically, Audi, BMW, Mercedes, Porsche and VW will also have electric-only vehicles for sale in the upcoming years that will compete with Tesla.
For now, I recommend avoiding TSLA, as well as the big three automakers here in the U.S.: F, GM and FCAU. To stay on top of my latest stock ratings for these four companies, plug their symbols into Portfolio Grader, my proprietary stock screening tool. You may get started here.