Automobile stocks: Tesla is a compelling idea, Ford and Toyota steady going

By Chris Lau for Kapitall.

Bears are looking for any negative news to lower the bullish story around Tesla ( TSLA). After a vehicle was stolen, a chase ensued and was then called off. The theft ended in a fiery crash, with the Model S vehicle splitting in two. The horrific destruction of the car pales in comparison to the level of safety actually offered by Tesla.

Supercharger developments

Tesla continues to hit its milestones. The firm just passed 1 GWh charging for the month of June. This equates to the savings of 168,000 gallons of gas and 4.2 million pounds of carbon dioxide offset.

Growth in China and Europe secondary

China and Europe and important growth markets for companies like Ford ( F) and Toyota ( TM), but Tesla’s focus needs to remain in North America. The firm needs to concentrate its capital expenditures on charging stations. Strong demand from this area should ensure Tesla consistently meets revenue targets. For now, the market believes Tesla’s growth story will justify its stock jump in the last year. By comparison, Toyota and Ford stock are drastically underperforming Tesla.

Investors who prefer lower valuation automobile plays might want to stick with Ford or Toyota. Their forward P/E is much lower, at 12 and 10, respectively. Ford grew sales in China by 35%, to 549,256 units for the first half of 2014.

Toyota is also enjoying strong sales. In the U.S., sales for the first half grew by 2.5 percent. Sales growth was strongest for the Corolla and Camry models.

Risks

Tesla’s growth story is not about to end any time soon, so the company will appeal to momentum investors. Traditional automobile stocks are less volatile and cost less, and might appeal for investors looking for exposure to the sector.

Disclosure: Author holds Ford stock.

Click on the interactive chart to view data over time. 

 

1. Ford Motor Co. ( F): Develops, manufactures, distributes, and services vehicles and parts worldwide. Market cap at $59.84B, most recent closing price at $15.18.

 

2. Toyota Motor Co. ( TM): Toyota Motor Corporation designs, manufactures, assembles, and sells passenger cars, minivans, commercial vehicles, and related parts and accessories in Japan, North America, Europe, Asia, and internationally. Market cap at $188.82B, most recent closing price at $119.12.

 

3. Tesla Motors, Inc. ( TSLA): Designs, develops, manufactures, and sells electric vehicles and advanced electric vehicle powertrain components. Market cap at $26.73B, most recent closing price at $217.65.

 

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

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