Should You Prefer General Motors Company (GM) over Tesla Inc (TSLA)?


General Motors Company (NYSE:GM) is making headlines after posting good sales numbers for the month of October. Analysts had long thought that General Motors Company (NYSE:GM) was losing in the competition in the automobile industry amid an onslaught by Tesla Inc (NASDAQ:TSLA) and Ford. But their thesis is turning out to be wrong. General Motors Company (NYSE:GM) sold a respectable 2,781 units of its Chevrolet Bolt EV in October, much better than the total number of Tesla’s sold in the same period in the US. InsiderEV estimates that Tesla sold about 1,970 units of its cars in the country last month. Tesla is facing production problems for Model 3. In the third quarter, the company produced just 260 Model 3 units, compared to 1,600 Models Elon Musk had promised to produce earlier this year.

But is General Motors Company (NYSE:GM) stock better than Tesla Inc (NASDAQ:TSLA) just because the former sold more cars than the latter in October? No. There are several other reasons why you should prefer GM over Tesla Inc (NASDAQ:TSLA). General Motors is a profitable company, while Tesla is burning a lot of cash and returning losses. In 2016, GM’s profit came in at $9.4 billion. General Motors Company (NYSE:GM) yields stands at 3.4% which is impressive. On the other hand, most of the value baked in Tesla Inc (NASDAQ:TSLA) shares are based on the future expectations and media hype. General Motors’ market cap is over $59 billion, while Tesla’s market cap is over $50 billion.

General Motors Company (NYSE:GM) has big plans for electric cars. Barclays’ analyst Brian Johnson recently upgraded the stock to “Overweight” and increased his price target to $55. Johnson said in his report that GM stock is trading at about seven times 2017 earnings estimates, versus the industry average of 15-20 times earnings. The analyst also said that the upcoming “electrification and autonomy” of General Motors Company (NYSE:GM) cars will increase the value of the stock. Johnson thinks that GM is an “evolving mammal” rather than a “dying dinosaur”.

Last month, Mainstay Capital Management’s CEO David Kudla said in a statement that General Motors is the best automobile stock to buy because the company is maximizing its profits from the peak cycle in the automobile industry and by investing in the future of cars. In October, General Motors Company (NYSE:GM) stock soared to new highs after the company announced that it had developed its “first mass producible self-driving car”.

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