Tesla vs. Ford Stock: Which Is a Better Investment?

Tesla vs. Ford Stock: Which Is a Better Investment?

Ford Tesla TSLA

The automobile industry is in a constant state of flux and technology continues to advance to points that seemed impossible a short few years ago. While some investors find the volatile atmosphere of auto trading exhilarating, for the average American, jumping into motor vehicle stocks a risky adventure.

While many experts are predicting a subdued year in terms of EVs growth rate in 2024 due to continuing slow consumer spending and high interest rates, more people than ever will buy EVs this year and every year for the next decade. For this year, however, one EV giant hopes to right its ship while another (traditional) car company expects to raise the stakes.

What Is a Better Investment: Tesla or Ford?

To say Tesla (NASDAQ: TSLA) had a rough first quarter of 2024 is an understatement. Tesla’s stock price has taken a beating so far this year, dropping nearly 30%, following a 102% price gain in 2023. Today’s price is just over $174 per share, trading at roughly two-thirds of its previous high of $258 in December 2023 and just over 42% from its all-time high of nearly $410 in November 2021.

Recent pitfalls notwithstanding, current investors seem to believe in Chief Executive Elon Musk and those on the fence seem interested, if Musk can get out of his own way. Tesla shares jumped 12% after the company posted disappointing Q1 financial results on April 23, seemingly due to Musk’s promises of affordable EVs, robotaxis and higher deliveries in 2024.

In theory, now is a good time to buy the dip with Tesla — share price is down and its potential growth is (debatably) still sky-high. Because of its massive market cap, Tesla is better placed to withstand any EV industry storms and financial slumps than other auto brands and is poised to rake in untold billions of dollars from its future endeavors: autonomous driving, AI applications and humanoid robot technology. Of course, no one knows if or when any of these innovations will materialize.

This is fascinating time for traditional car companies too, who have had to adapt to a future manufacturing electric vehicles or face the prospect of closing up shop over the next decade. Despite being one of the oldest car manufacturers in the world, Ford Motor Co. (NYSE: F) has always been lauded for its innovative outlook, putting it in good stead to remain one of the automotive leaders moving forward.

Promising to spend $50 billion on EV models through 2026 and produce two million EVs by that time annually, Ford is already a major player in the electric vehicle game. According to U.S. News & World Report, Ford sold the second most EVs in the U.S. in 2023 (72,608) behind Tesla, and enjoyed a year-over-year sales increase of 18%.

But Ford has had recent troubles too. According to Fast Company, Ford’s EV division announced a $1.3 billion loss in the first quarter, suggesting profitability may be a long ways off. Losses have been attributed to growing pains and up front investment, but still, losing $100,000 on every electric vehicle it sells is not a good look.

Both companies’ revenues have steadily increased over the past three years (Tesla’s at a better rate than Ford’s), according to Motley Fool contributor Parkev Tatevosian, however, a quick look at Tesla’s valuation might swing a stock investment decision to one side or the other.

Despite being one of the worst performing stocks on the S&P 500 this year, Tesla stock is still expensive despite price cuts to its models and weaker-than-expected deliveries. According to Investors Business Daily, with the exception of inflated price-earnings (P-E) ratios on April 30, Tesla’s forward P-E ratios for 2024 and 2025 as of May 5 are the highest they’ve been than for any end-of-month reading going back 18 months, at 73.7 and 54.2, respectively. For a stagnating-to-suffering company, that’s too rich and risky.

Ultimately, Ford is the better stock buy. It’s too risky to believe that competition isn’t going to be ceaseless and aggressive and that Tesla can somehow fend everyone off to rule the market. The many issues facing Musk and his company feel like the beginning of something more lasting than transitory.

Leave a Reply

Your email address will not be published. Required fields are marked *

Pin It on Pinterest