Tesla Motors, Inc. (NASDAQ:TSLA) is a designer and manufacturer of electric vehicles. Many investors have likened the company as being the next Apple (NASDAQ:AAPL). However, the proven success that Apple has had with multiple products, over many years is very unique. Plus, Apple has a balance sheet containing billions in cash and huge profits, which is a stark reminder that the comparison is far-fetched in a number of ways.
While Tesla has the cool factor that many companies would like to have, many challenges remain and if you want to invest in cool, then it makes sense to own Apple. If you want to invest in the auto sector, then it makes sense to buy a highly diversified and profitable manufacturer like General Motors (NYSE:GM) or Ford (NYSE:F). Tesla plans to introduce the Model "S" in 2012, and if history is any guide, it may not live up to the expectations that investors currently have. In 2011, we have seen a number of "green" companies encounter huge challenges and even failure. The solar industry has been a debacle for many investors, and the high profile green energy company Solyndra even filed for bankruptcy.
In the auto sector, the promise of "green" electric vehicles has also been underwhelming with sales of Nissan's Leaf coming in lower than expected and the Chevy Volt not only seeing very low levels of consumer interest, but also even potential safety issues with the car itself. Once Tesla releases the Model "S", it could see some of the same issues many other electric vehicle makers have seen which range from weak consumer demand to manufacturing challenges and potentially even quality or recall issues.
If you want to invest in the auto sector, it makes sense to buy Ford and GM which are currently both profitable and deeply undervalued. In fact, both stocks are trading at less than half the price to earnings ratio of
the S&P 500 Index, which currently trades for about 13 times earnings. Both Ford and GM have very broad product lines which helps to diversify the risks. They also have the financial resources to whether a recession and deal with issues like recalls which it seems every major automaker sees sooner or later. Here is a closer look at the three automakers:
Tesla Motors, Inc. (TSLA) is a leading maker of electric vehicles. The company makes some cool products but challenges loom. Investors might be paying up too much to own the "cool factor" that Tesla has now. When you can almost buy 100 shares each of GM and Ford for not much more than 100 shares of Tesla, it's hard to understand the position of Tesla bulls, especially with GM and Ford pumping out profits while Tesla continues to post losses.
Here are some key points for TSLA:
Current share price: $28.51
The 52 week range is $21.11 to $35
Earnings estimates for 2011: a loss of about $2.14 per share
Earnings estimates for 2012: a loss of about $1.91 per share
PE Ratio: n/a
Ford Motor Company (F) is a leading automaker that did not take bailout funds from the U.S. Government. This company sells under the Ford, Lincoln, and Mercury brands. Ford recently introduced a 5 cent per share dividend. This company is making great cars that offer fuel efficiency in many models. Ford shares are trading for only about 6 times 2012 earnings, and the stock should double in value over the long-run.
Here are some key points for F:
Current share price: $10.52
The 52 week range is $9.05 to $18.97
Earnings estimates for 2011: $1.87 per share
Earnings estimates for 2012: $1.59 per share
Annual dividend: 5 cents per share
General Motors, Inc. (GM) is one of the largest automakers in the world. The company image still seems to suffer from the government aid it received, but over time that may fade. GM shares could rise after the U.S. Government sells its stake in the automaker. GM stock should double in time due to the very low valuation. The stock trades below book value at $21.96 and at a price to earnings ratio of about 5.
Here are some key points for GM:
Current share price: $19.86
The 52 week range is $19.00 to $39.48
Earnings estimates for 2011: $3.93 per share
Earnings estimates for 2012: $3.82 per share
Annual dividend: None
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.