Tesla Passes Ford, GM as America’s Most Valuable Car Company

Elon Musx in Tesla X (Justin Sullivan / Getty)
Elon Musx in Tesla X (Justin Sullivan / Getty)

Tesla stock jumped by 3 percent on April 10 to pass Ford and GM as America’s most valuable auto maker in just 14 years.

With its stock (TSLA: NASDAQ) jumping $10 a share to $313, Tesla Inc.’s total stock market capitalization hit almost $52 billion, blowing past GM’s $50 billion and Ford’s $45 billion market value. The move came after Piper Jaffray brokerage analyst Alexander Potter issued a buy recommendation before the opening of trading on April 10 with a target price of $368 a share, according to the Zero Hedge blog.

Potter slashed his 2017 annual earnings-per-share estimate from a profit of $0.42 to a loss of $4.83, based on his belief that Tesla now has the financial capacity to pay for the tooling and production ramp-up to start shipping up to 500,000 of its all-electric-powered Model 3 sedans beginning in late 2017.

On March 27, Breitbart News wrote a glowing review of the Model 3, which is expected to sell for about $40,000, versus $100,000-plus for for Tesla’s Model S sedan. There was a substantial risk, however, that the company would run out of cash and fail, given that Tesla has never met a production schedule or made an annual profit.

The situation seemed especially dicey, with Tesla’s CFO resigning in February after admitting the company had burned through $700 million of pre-paid Model 3 customer deposits and might be soon in violation of its bank line of credit.

But Tesla’s financial situation seemed to improve on March 28, when the company disclosed that China’s Tencent Holdings Limited had purchased 5 percent of its stock. Given the hardball trade negotiations leading up to China’s President Xi Jinping’s meeting with President Trump, traders speculated China would fund the Model 3.

The higher Tesla stock price caused a panic among Wall Street traders that as of last month had sold short 31,068,721 shares, hoping the company would run out of cash and be forced into bankruptcy. But with Tesla’s average daily trading volume of about 4 million, it could now take almost 8 days of worth of trading for the short sellers to cover their bad bets.

Tesla is now the fourth-highest capitalized car company on the planet, still behind Toyota at $176 billion, Mercedes at $75 billion and BMW at $54 billion.


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