The automotive industry is constantly changing and technology continues to advance to a point that seemed impossible just a few years ago. While some investors find the volatile atmosphere of auto trading exhilarating, diving into auto stocks is a risky venture for the average American.
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Many experts predict that 2024 will be a weak year for EV growth as consumer spending continues to be weak and interest rates remain high, but this year and each year for the next decade will be faster than ever. Many people will buy EVs. But this year, one EV giant wants to turn around and another (traditional) car company is looking to up the ante.
Which is a better investment: Tesla or Ford?
It’s safe to say that Tesla (NASDAQ: TSLA) had a tough first quarter of 2024. Tesla stock has plunged since the start of this year, falling nearly 30% after rising 102% in 2023. The stock currently trades at just over $174 per share, about two-thirds of its December 2023 all-time high of $258. This is over 42% from the all-time high of around $410 in November 2021.
Despite recent pitfalls, current investors appear to have faith in CEO Elon Musk, and if Musk can get out of his own way, even cautious investors will be interested. It seems like you have it. Tesla stock rose 12% after the company announced disappointing first-quarter results on April 23, which comes as Musk plans to build affordable EVs, robotaxis and more in 2024. This appears to be because they had promised to deliver the car.
In theory, now is a good time to buy Tesla. Although the stock price is down, its growth potential is (arguably) still very high. Because of its huge market capitalization, Tesla is better positioned than other car brands to withstand storms and downturns in the EV industry, with untold billions in potential from future initiatives such as self-driving, AI applications, and humanoid robot technology. It is poised to rake in dollars. Of course, no one knows when these innovations will materialize.
This is also an attractive time for traditional car companies. They must adapt to the production of future electric vehicles or face the prospect of closing their factories within the next decade. Despite being one of the oldest automakers in the world, Ford Motor Company (NYSE: F) has always been admired for its innovative outlook and will continue to be a leader in the auto industry. We are certain that we will continue to be one of the top companies.
Ford is already a major player in the electric vehicle game, pledging to invest $50 billion in EV models by 2026 and produce 2 million EVs a year by then. According to U.S. News & World Report, Ford sold the second most EVs in the U.S. (72,608 vehicles) in 2023 after Tesla, achieving an 18% sales increase over the previous year.
But Ford has also had problems lately. According to Fast Company, Ford’s EV division announced a loss of $1.3 billion in the first quarter, suggesting profitability may still be a long way off. The losses are blamed on growing pains and upfront investment, but losing $100,000 on every electric car sold isn’t a good look.
According to Motley Fool contributor Parkev Tatevosyan, both companies’ revenues have steadily increased over the past three years (Tesla has a better growth rate than Ford), but a rough estimate of Tesla’s valuation: If you look at it, your stock investment decision could swing either way.
Tesla stock remains expensive despite being one of the S&P 500’s worst performers this year, despite lower model prices and lower-than-expected deliveries. According to Investor’s Business Daily, excluding the April 30 price-earnings (PE) spike, Tesla’s 2024 and 2025 forward P/E ratios as of May 5 were lower than any month-end figures. Going back 18 months, the all-time highs were 73.7 and 54.2, respectively. It’s too rich and too risky for stagnant and struggling companies.
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At the end of the day, Ford is the better stock to buy. Competition is not constant and it is too dangerous to believe that Tesla can somehow fend off everyone and dominate the market. Many of the problems facing Musk and his company feel less than temporary and more like the beginning of something more permanent.
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This article originally appeared on GOBankingRates.com: Tesla vs. Ford Stock: Which is the Better Investment?
