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Why Ford is worth less than Tesla

Rick Newman
Columnist

Ford Motor Co. (F) sold 6.7 million cars in 2016 and booked a profit of $4.6 billion. Tesla (TSLA) sold a mere 76,000 cars and lost $675 million. Yet Tesla’s market value, $50.3 billion, is 12% higher than Ford’s value of $44.9 billion.

Tesla’s value is stratospheric because its stock has soared during the last four months. Ford’s, by contrast, has dipped. Though both companies sell cars, investors seem to consider them totally different kinds of businesses. Tesla, for now, has the cachet of a hot tech company poised to own the future, while Ford is akin to an aging industrial behemoth rooted in the past. Tesla’s value reflects optimism; Ford’s, resignation.

A five-year look at Ford and Tesla stock

Ford aims to change that, as CEO Mark Fields explains to Yahoo Finance in the video above. “We do think we’re undervalued,” he says. “We think we’re a solid investment with an attractive upside on these emerging opportunities.”

Shifting gears

What Ford needs to do is prove that with real results. During the last couple of years, the automaker has declared a shift from simply building and selling cars to providing various types of mobility, which might include Uber-style rides, shuttles, shared vehicles and even bicycles. The company is investing heavily in electric vehicles—Tesla’s forte—and in self-driving cars, which many analysts expect to transform the auto industry within a decade or two.

While Ford has announced plenty of investments in new technologies, those haven’t yet generated a payoff. “We’ll dimension that in the near future,” Fields says. “We’ll talk more about what that will mean for value creation.”

Challenges ahead

Meanwhile, Wall Street analysts worry that US car sales, while still strong at more than 17 million per year, may have peaked, forcing Ford and other automakers to discount more in order to move the metal. Britain’s forthcoming departure from the European Union will depress Ford’s sales in Europe, putting further downward pressure on the stock price. And Ford isn’t the only one. Shares of General Motors (GM), for instance, have flatlined lately, even as the broader market has risen.

Still, it remains something of a mystery why investors have bid Tesla shares higher than even some of the company’s biggest fans expected the stock to go. Tesla plans to introduce a new vehicle, the Model 3, sometime in the next year, but electrics are still a tiny part of the overall market, with cheap gas dimming the outlook. Investors seem to think Tesla will someday dominate an industry where it’s now a niche player. Ford sees a different future.

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman