Investors barely reacted after Tesla (NASDAQ: TSLA) disclosed on Twitter that it has a production bottleneck for Model 3. They should. The stock is valued with the assumption that revenue will accelerate from Model 3 sales.
CEO Elon Musk said it would delay its truck release. He has more other issues to work out. For one, the Model 3 bottleneck is so troubling that Tesla will build only 1,500 Model 3, 80% lower than its production guidance. Investors are too casual with Tesla’s production issue. TSLA stock is worth $60 billion, $12 billion more than that of Ford (NYSE: F) stock (Ford has a market cap of $48 billion). At least General Motors (NYSE: GM) is getting recognized by the market. The market cap for GM stock is $67 billion and still has a valuation of a 7.8x forward P/E. If Ford and GM both figure out how to mass produce EVs, it will be more attractive growth stocks.
For now, Tesla’s innovative lead and valuable branding will keep the company’s valuations high. If perceptions change, look out. And if markets start questioning valuations for expensive companies, Tesla is at risk of underperforming on the stock market.
