Tesla Vs Toyota


At this stock price, this makes Tesla’s market cap almost 260 billion dollars.

In contrast, around a month ago, Toyota’s stock price was right around one hundred and thirty dollars, and as of July seventh it was at one hundred and twenty-five dollars and eighty-nine cents.

That makes their market cap right around two hundred and six billion dollars.

There’s a huge price difference between a share of Tesla stock and a share of Toyota stock. According to the market, Tesla is now worth about 54 billion more dollars than Toyota.

When you take a look at the number of vehicles delivered by each company, this paints a picture that maybe Tesla is overvalued.

In 2017 Tesla delivered just over a hundred and three thousand vehicles, whereas Toyota delivered ten point four million vehicles. As a comparison, that’s less than one percent of the vehicles delivered by Tesla, compared to Toyota.

In the fiscal year 2018, Toyota delivered ten point six million vehicles, and Tesla delivered 244 thousand plus vehicles.

And then, in the fiscal year 2019, Toyota delivered ten point seven million vehicles, and Tesla delivered 367 thousand plus vehicles or about 3.4 percent of the vehicles that Toyota delivered.

When it comes to revenue in the fiscal year 2017, Toyotas total revenue of two hundred fifty-six point seven billion dollars, compared to Tesla’s eleven point eight billion dollars. In the fiscal year 2018, Toyota’s total revenues were 260 4.4 billion, compared to Tesla’s 21.5 billion.

Delivery Comparisons

YearToyotaTeslaYSLA/TM
201710.4 Million103,0200.9%
201810.6 Million244,9202.3%
201910.7 Million367,2003.4%

In the fiscal year 2019, Toyota’s revenues were 272 billion, compared to Tesla’s twenty-four point six billion.

One thing that is really important to note on both of these charts is that if you look at the percentage where you compare Tesla’s revenue or Tesla’s deliveries to Toyota’s revenue or Toyota’s deliveries, you’ll notice that the percentage for Tesla compared to Toyota is rising.

Revenue Comparison

YearToyotaTeslaYSLA/TM
2017$256.7 Billion$11.8 Billion4.6%
2018$264.4 Billion$21.5 Billion8.1%
2019$272.0 Billion$24.6 Billion9%

On the surface level, it appears like Tesla may be overvalued, but I don’t believe Tesla Motors is overvalued, and I believe that the market is now truly understanding the true value of Tesla as a company.

As an investor, one of the ways to compare one company to another, even if one of the companies is a little larger than the other company, is you can look at the earnings per share.

Meaning if you take the total earnings of the company, divided by the number of shares that are outstanding, this gives you a dollar amount in earnings per share.

As of July of 2020, Toyota has issued a total of 3.263 billion shares, whereas Tesla has issued around 185 million shares.

This huge disparity in the number of shares issued by each company help explain why Tesla’s stock price can be near $1400, and Toyota’s price can be somewhere just over a hundred dollars, and the market caps wouldn’t be drastically different.

Going back to the earnings per share, this also paints a really good picture of the company and what they are earning, compared to how many shares are outstanding, and you can see a good comparison between these two companies.

As you can see from the table and Q1 of 2019, Tesla lost $4.10 in earnings per share, whereas Toyota was positive. Q2 2019 Tesla lost $2.31, whereas their earnings per share for Toyota were $4.32, but as you can see, there as you drop down, of course, Q3 2019 Tesla was positive $1.86 and the earnings per share Q4 2019 $2.06.

Where it really becomes interesting is in Q1 of 2020, Tesla’s earnings per share were $1.24, whereas Toyota’s earnings per share were only $0.45.

EPS Comparisons

QuarterTeslaToyota
Q1 2019-$4.10+$2.89
Q2 2019-$2.31+$4.23
Q3 2019+$1.86+$3.87
Q4 2019+$2.06+$4.79
Q1 2020+$1.24+$0.45

For the first time, Tesla’s earnings per share surpassed Toyota’s, who was the most valuable automaker in the world. If Tesla can post even a small profit in Q2 of 2020, I believe their earnings per share could possibly beat Toyota’s.

One of the big reasons why Tesla stock price has been rising a lot over the last year is because Tesla has been positive for the last three quarters. In Q3 of 2019, they posted 261 million dollars of gap profit.

In Q4 2019, they posted 359 million dollars of gap profit. In Q1 of 2020, they posted 283 million dollars of gap profit.

We don’t know the results for Q2 of 2020, but they had a good delivery number, and I believe they could post a gap profit in Q2 of 2020.

TeslaDeliveriesAuto MarginGAAP Profit
Q3 202997,18622.8%+$261 Million
Q4 2019112,09522.5%+$359 MIllion
Q1 202088.49625.5%+$283 Million
Q2 202090.650??????

This would mark four quarters in a row of gap profit, and it could make 2020 their first full profitable calendar year. When you look at Tesla’s growth over the last several years, you see that it has grown substantially.

Tesla grew fifty-one percent from 2015 to 2016, 35 percent from 2016 to 2017, and then 2017 to 2018 138 percent growth and then in 2018 to 2019 50 percent.

Tesla Growth

YearDeliveriesYOY %
201550,580
201676,23051%
2017103,02035%
2018244,920138%
2019367,2050%
2020500K????

It’s possible that Tesla will deliver over 500,000 vehicles in 2020, and that would mark a very substantial growth. Tesla is still growing very quickly, their earnings per share are growing now that they’re profitable, and Tesla is doing a lot of things right.

With these financial metrics in mind, let’s dive into the reasons why I believe the market is right, and that Tesla should be worth more than Toyota.

The first reason why I believe that the market is right about Tesla’s valuation is that Tesla is growing as an auto manufacturer when other auto manufacturers are shrinking.

I dove into this topic recently, but on a basic level, if you look at this chart all these major auto when you compare q1 and Q2 of 2019 to Q1 and Q2 of 2020, these auto manufacturers are down substantially.

Nissan is down 39.3%, BMW down 29.4%, Fiat Chrysler down 25.8%, and Toyota Motor Sales USA are down 22.4%.

In stark contrast for this same period of time, Tesla was positive 13.2%. Another reason why I believe the market is right, and that Tesla should be worth more than Toyota is that Tesla is way more than an auto manufacturer.

Sales Comparison

AutomakerYTD 2019 vs 2020
Nissan North America-39.3%
BMW North America-29.4%
Fiat Chrysler-25.8%
Honda Motors-23.8%
Ford Motors-23.4%
VW Group USA-22.5%
Toyota USA-22.4%
General Motors-21.4%
Tesla+13.2%

Tesla not only sells great electric vehicles, but they also have an energy division called Tesla energy. They sell solar panels, and they also sell solar panels integrated into a roof called their solar roof.

They have battery storage options for both residential and commercial use, their power wall for the residential and the power pack, and the mega pack for more commercial uses.

Although currently, Tesla’s energy is a smaller piece of Tesla’s revenue compared to the automotive revenue, it is a big important piece of Tesla’s future.

Elon Musk has even talked about the fact that at some point in the future, Tesla energy could surpass Tesla as an auto manufacturer when it comes to revenue and size.

When you take a look at the revenue of Tesla’s energy business, you can see that in 2017 Tesla Energy had 1.12 billion dollars in revenue.

2018 1.5 5 billion dollars, 2019 1.5 3 billion dollars, and in 2020 if Tesla can grow its revenue by 50%, that would equal 2.3 billion dollars.

In 2021 if they get slightly more than double that amount, that would be somewhere around 5 billion dollars.

Energy Revenue

YearRevenue
2017$1.12 Billion
2018$1.55 Billion
2019$1.53 Billion
2020$2.3 Billion (50% Growth)
2021$5 Billion? (100% Growth)

Tesla still has a lot of room for growth in its energy division. Two of the things are holding back their energy division is in the past. They had a limitation on the number of battery cells available for their power wall power pack and megapack.

Currently, they are trying to work out the details for the solar roof so they can deploy it out in any large numbers.

A Tesla scheduled battery day in a few months, we should learn more about their plan to produce enough batteries to feed the energy division for Tesla, and hopefully, we’ll get more updates on Tesla solar roof in the future.

Once tests are really is able to ramp these up and fill the demand that is there, I believe Tesla’s energy division could grow quite substantially, quite quickly.

Tesla’s energy division is a profitable division within the company. In 2017 they posted 241 million dollars in gross profit from Tesla energy, in 2018 190 million dollars and 2019 around 190 million dollars.

As Tesla’s shifts to higher-margin products like their power wall power, pack and megapack, and in the future their solar roof, I believe that their gross profit margin could return to levels that they saw in 2017.

Suppose they are able to grow their energy revenue from 2019 to 2020 at a 50 percent rate and reach a gross profit margin of 20 percent that would represent 460 million dollars in 2020.

If they’re able to double the revenue from 2020 to 2021, and still post a 20% gross profit that could represent 1 billion dollars of gross profit.

Profit Margin

YearAmount MillionGross Profit
2017$24121.6%
2018$29012.2%
2019$19012.4%
2020$46020%*
2021$1 Billion20%*
* 2020-2021 Based On Current Trajectory

These are of course estimates, and these could be wrong, but they do paint a picture and show you how Tesla’s energy division could make a big difference in their revenue, and also in their profit.

On top of that, Tesla could, at some point in the future, become an electric utility company selling energy to the grid.

There was an electric article in October of 2019 that talked about this entitled Tesla energy is becoming distributed global utility and could outgrow automotive business.

On June fifteenth of this year 2020, Tesla was officially approved as an electric utility in the UK.

We don’t have very many details on this, but it is an interesting thing to explore, and hopefully, we’ll find out more about this in the future. This could also add to Tesla’s business lines, and it could also add to the revenue and their profit.

Tesla is more than an auto manufacturer, and we’ve shown you Tesla energy, but Tesla also sells insurance in California. For residents of California in the United States, if you want insurance, you can get it directly from Tesla, and they have an underwritten by another company.

At some point in the future, it appears like Tesla may expand this out to other states in the United States and also to other countries, and at some point, this could even be something that Tesla underwrites themselves.

In addition to Tesla’s energy, Tesla insurance, Tesla is also a software engineering company, a battery manufacturer, and they also own Tesla Grumman automation, which makes robot and other automation equipment.

Unlike other auto manufacturers, they also own their service division, that’s not done through dealerships. Tesla owns its own charging network, and although they don’t attempt to make a profit on that network at some point in the future, that could at least turn a small profit.

When Tesla is able to solve full self-driving, they’ll be able to deploy Robo taxis and make a huge amount of money from that division.

The last and final reason why I believe that Tesla should be worth more than Toyota is the fact that EV’s are the future, and Tesla is currently the leader in electric vehicles.

Both in the United States and in several other countries, governments are passing legislation that is encouraging electric vehicles or other clean air vehicles. EV’s are the future, not only because of government regulation but also because EV’s are better.

Electric vehicles are very quiet, they’re more efficient, they have instant acceleration, and they also have zero tailpipe emissions.

One of the reasons why I believe that gas-burning vehicles and diesel-burning vehicles will become obsolete in the coming decades is because they are so inefficient compared to electric vehicles.

According to fuel economy.gov, when you follow the power from the tank to wheels, you actually get 16 to 25 percent of the power in the gasoline to the wheel in a gasoline car. There are a lot of losses in the conversion of gasoline to forward motion.

On the flip side, when you look at the same chart for electric vehicles, and this is not even the more efficient Tesla electric vehicles, you can see there that the power to the wheels increases to 69 to 73 percent.

When you count regenerative braking, that number can increase to 86 to 90 percent.

With all these factors in mind, it’s my opinion that Tesla should be valued more than Toyota and that the market now realizes the true value of Tesla as a company.

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