Which is better: Tesla’s stock or GM’s stock?

Tesla is currently the dominating force in the growing electric vehicle market, just as legacy automakers like General Motors are starting to invest heavily into an electrified future. For retail investors keen to get ahead of the burgeoning market, the choice between GM and Tesla’s stock may be a difficult one. 

Seeking Alpha’s Mirco Lysek recently looked at GM and Tesla’s stocks side by side in an attempt to determine which one is a better pick for investors. Using in-depth fundamental analyses, Lysek explains a few separate models for the auto stocks, detailing each company’s structure, stock performance in recent years, future potential valuation and overall risk factors.

It’s worth looking at Lysek’s in-depth arguments in full over at Seeking Alpha, but for the sake of this article, we’ll focus primarily on a few takeaways for each company.

Despite weak performance across autos, Lysek points out that the industry is facing its biggest disruption since gas cars were introduced, meaning that it could be a time full of opportunity for patient investors. However, GM will need to address massive debts and improve EV profitability to continue competing with Tesla. Meanwhile, Tesla only broke even on its operating margin in 2019, since growing significantly in profitability — almost doubling that of GM’s most recent margin.

Lysek points out that GM’s over-dependence on internal combustion engine (ICE) vehicles is currently limiting its growth, splitting the automaker’s focus between its ICE business and its EV business even in the face of increasing EV competition. Alternatively, Tesla can concentrate on what it already does, building an EV-only lineup, while competition slowly ramps up.

Interestingly, both companies are viewed by Seeking Alpha’s Quant Rating system as having an A+ in profitability. Tesla is ranked with a D in valuation and D- in momentum, while gaining favorable B- and A ratings in revisions and growth, respectively. GM, on the other hand, was given a C in valuation and a B- in momentum by the index, in addition to an A- in revisions and a D- in growth.

Following financial analyses looking at free cash flow, debt and estimated future valuation factors, Lysek reiterates that the rating system has given Tesla a Hold rating over the past few years, with the company in 13th out of 33 auto manufacturers on the index. During the same time period, GM bounced back and forth between Strong Buy and Hold positions, more recently being ranked 9th out of the 33 in the index and being given a Hold once again.

Still, Tesla’s grasp on the EV market and future growth factors may make it the better pick, according to Lysek.

“While Tesla is the pure player in EVs, leading the U.S. market, GM is heavily investing in its EV fleet and both companies are facing increasingly strong competition from local but also international manufacturers,” Lysek wrote.

“From an investor's point of view, it’s important to consider the company’s ability to create value for its shareholders, while minimizing the risks, and in those terms, Tesla offers a better profile.”

While there’s no way to know how Tesla or GM’s stock will perform in the coming years, Lysek says he chooses Tesla because of its future opportunities and overall financial strength. Still, he also notes significant barriers due to the auto industry’s currently “unfavorable downtrend,” adding that he’ll wait for some of this to clear up before making any substantial investments into the sector.

===

Source: Seeking Alpha
USD
  • US Dollar (USD)
  • Euro (EUR)
  • British Pound (GBP)
  • Canadian Dollar (CAD)
  • United Arab Emirates Dirham (AED)
  • Albanian Lek (ALL)
  • Afghan Afghani (AFN)
  • Armenian Dram (AMD)
  • Angolan Kwanza (AOA)
  • Argentine Peso (ARS)
  • Australian Dollar (AUD)
  • Aruban Florin (AWG)
  • Azerbaijani Manat (AZN)
  • Burundian Franc (BIF)
  • Barbadian Dollar (BBD)
  • Bangladeshi Taka (BDT)
  • Bahamian Dollar (BSD)
  • Bahraini Dinar (BHD)
  • Bermudan Dollar (BMD)
  • Belarusian Ruble (BYN)
  • Belize Dollar (BZD)
  • Bhutanese Ngultrum (BTN)
  • Bosnia-Herzegovina Convertible Mark (BAM)
  • Brazilian Real (BRL)
  • Bolivian Boliviano (BOB)
  • Botswanan Pula (BWP)
  • Brunei Dollar (BND)
  • Bulgarian Lev (BGN)
  • Congolese Franc (CDF)
  • Swiss Franc (CHF)
  • Chilean Peso (CLP)
  • Chinese Yuan (CNY)
  • Colombian Peso (COP)
  • Costa Rican Colon (CRC)
  • Czech Republic Koruna (CZK)
  • Djiboutian Franc (DJF)
  • Danish Krone (DKK)
  • Dominican Peso (DOP)
  • Algerian Dinar (DZD)
  • Egyptian Pound (EGP)
  • Ethiopian Birr (ETB)
  • Fijian Dollar (FJD)
  • Falkland Islands Pound (FKP)
  • Gibraltar Pound (GIP)
  • Ghanaian Cedi (GHS)
  • Gambian Dalasi (GMD)
  • Guinean Franc (GNF)
  • Guatemalan Quetzal (GTQ)
  • Georgian Lari (GEL)
  • Croatian Kuna (HRK)
  • Honduran Lempira (HNL)
  • Hong Kong Dollar (HKD)
  • Haitian Gourde (HTG)
  • Hungarian Forint (HUF)
  • Indonesian Rupiah (IDR)
  • Israeli New Shekel (ILS)
  • Icelandic Krona (ISK)
  • Indian Rupee (INR)
  • Iraqi Dinar (IQD)
  • Iranian Rial (IRR)
  • Jamaican Dollar (JMD)
  • Japanese Yen (JPY)
  • Jordanian Dinar (JOD)
  • Kenyan Shilling (KES)
  • Kyrgystani Som (KGS)
  • Cambodian Riel (KHR)
  • Comorian Franc (KMF)
  • South Korean Won (KRW)
  • Kuwaiti Dinar (KWD)
  • Cayman Islands Dollar (KYD)
  • Kazakhstani Tenge (KZT)
  • Lebanese Pound (LBP)
  • Sri Lankan Rupee (LKR)
  • Liberian Dollar (LRD)
  • Lesotho Loti (LSL)
  • Libyan Dinar (LYD)
  • Moroccan Dirham (MAD)
  • Moldovan Leu (MDL)
  • Malagasy Ariary (MGA)
  • Myanmar Kyat (MMK)
  • Macedonian Denar (MKD)
  • Macanese Pataca (MOP)
  • Mauritian Rupee (MUR)
  • Maldivian Rufiyaa (MVR)
  • Malawian Kwacha (MWK)
  • Mexican Peso (MXN)
  • Malaysian Ringgit (MYR)
  • Mozambican Metical (MZN)
  • Namibian Dollar (NAD)
  • Nepalese Rupee (NPR)
  • New Zealand Dollar (NZD)
  • Nicaraguan Cordoba (NIO)
  • Norwegian Krone (NOK)
  • Omani Rial (OMR)
  • Panamanian Balboa (PAB)
  • Pakistani Rupee (PKR)
  • Papua New Guinean Kina (PGK)
  • Peruvian Nuevo Sol (PEN)
  • Philippine Peso (PHP)
  • Polish Zloty (PLN)
  • Qatari Rial (QAR)
  • Romanian Leu (RON)
  • Russian Ruble (RUB)
  • Rwandan Franc (RWF)
  • Saudi Riyal (SAR)
  • Sao Tome and Principe Dobra (STD)
  • Serbian Dinar (RSD)
  • Seychellois Rupee (SCR)
  • Singapore Dollar (SGD)
  • Syrian Pound (SYP)
  • Swedish Krona (SEK)
  • New Taiwan Dollar (TWD)
  • Thai Baht (THB)
  • Tanzanian Shilling (TZS)
  • Trinidad and Tobago Dollar (TTD)
  • Tunisian Dinar (TND)
  • Turkish Lira (TRY)
  • Solomon Islands Dollar (SBD)
  • Sudanese Pound (SDG)
  • Sierra Leonean Leone (SLL)
  • Surinamese Dollar (SRD)
  • Swazi Lilangeni (SZL)
  • Tajikistani Somoni (TJS)
  • Tongan Paanga (TOP)
  • Turkmenistani Manat (TMT)
  • Ukrainian Hryvnia (UAH)
  • Ugandan Shilling (UGX)
  • Uruguayan Peso (UYU)
  • Uzbekistan Som (UZS)
  • Venezuelan Bolivar (VEF)
  • Vietnamese Dong (VND)
  • Vanuatu Vatu (VUV)
  • Samoan Tala (WST)
  • Central African CFA Franc (XAF)
  • CFP Franc (XPF)
  • Yemeni Rial (YER)
  • South African Rand (ZAR)