A Tale Of Two Car Stocks: Tesla Or General Motors?

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

Earnings season is in full swing now and while the numbers are a little better than I was steeled to see, many of the reports still leave a lot to be desired. Let’s start with Tesla Inc. (NASDAQ:TSLA).

Advertisement.

People on Wall Street are cheering the fact that Elon Musk once again managed to swing the company to a profit after burning $500 million over the previous two quarters. At this rate, he might end the year roughly where he started.

That’s not the kind of business that usually earns a 1.8X sales valuation on the stock. And while Musk’s production mix has finally pivoted from luxury electric sedans to the mass-market Model 3, it’s hard to ignore the fact that Tesla’s revenue actually went down $500 million from last year.

Tesla isn’t even growing the top line quarter to quarter. If you’re evaluating this company according to sales, the stock should be pointed down.

Advertisement.

Giant Stock, Tiny Company

I say more about this in my radio show, but I want to give you a preview here. I love Tesla cars; I just don’t see the appeal of the company or the stock.

Musk fans often say Tesla is one of the biggest disruptors on the planet and that it is eating the lunch of every established car company within charging range. I admit, it takes a brilliant imagination to engineer these vehicles and build a $25 billion market around them.

But even though General Motors Co. (NYSE:GM) is having a tough year, demand for GM cars is actually holding up better than what we’re seeing from Tesla. Weighing the two product lines, Tesla revenue is down 7 percent while GM is 6 percent below last year’s level.

Advertisement.

And GM is still a behemoth with a commercial footprint six times bigger than its all-electric rival. While that top line isn’t rising, we can make the exact same case against Tesla.

Exclusive  Is It Time to Cut Interest Rates?

Both companies had a rough quarter. The trade war has stung and with GM, labor tensions have boiled over. Neither stock is a prize right now.

Compared to Tesla, GM looks grossly undervalued. With nearly identical sales growth curves, is there any reason Tesla deserves a premium price?

Remember, GM is a profit machine that pays a 4 percent yield. Tesla has only made money so far when Musk cuts his way to positive margins. If sales are shrinking, you need to keep cutting to sustain profitability.

If you stripped the Tesla brand and Musk’s cult of personality from the stock and scrubbed all long-term hopes and fantasies from the revenue models, TSLA and GM should support a similar valuation right now.

Advertisement.

They both make cars. They sell as many as they can as profitably as management can engineer. One car may be fancy and the other is an American classic, but cash flow has no taste. It’s all about the dollars.

On that basis, either TSLA should trade around $50 or GM should be a $180 stock. Is one too cheap or is the other too expensive relative to its peers?

I’m biased. GM occasionally shows up in my Value Authority universe. Tesla is not part of the GameChangers portfolio for a good reason.

But it’s a trader’s market. Click here now to watch my presentation about how you can profit when Wall Street turns choppy.

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE