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Is Tesla Stock the Next Apple or Amazon?


Oct. 14 2019, Updated 12:44 p.m. ET

  • Tesla stock has sagged this year even as the broader markets are near their all-time highs. Established automakers are also in the green despite tepid car sales.
  • Meanwhile, fans don’t see Tesla in the same league as other automakers, and they draw parallels with tech companies like Apple and Amazon.
  • As a pure-play electric vehicle producer with a major emphasis on software and autonomous driving, Tesla is a mix of an automotive company and a technology company. The company also focuses on solar and other sustainable energy solutions. Notably, tech giants Apple, Alphabet, and Amazon also invest in autonomous driving.
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Tesla stock

Tesla (TSLA) is among the most followed stocks, highlighted by CEO Elon Musk’s intriguing public presence and cutting-edge ideas. That said, TSLA stock is one of the most polarizing stocks. Tesla fans compare it with tech giants like Apple (AAPL) and Amazon (AMZN). However, for another section of the market, it is a money-losing automotive company.

In our view, Tesla blends the characteristics of an automotive and technology company. Some of the leading automotive companies also admire TSLA’s software abilities. From a valuation standpoint, we see a significant difference between how markets see automotive companies and technology companies.

In general, tech companies attract high valuation multiples, while automotive companies’ valuation multiples are lower. In this article, we’ll discover whether TSLA stock bears any resemblance to Apple and Amazon stock in their earlier years.

Apple and Amazon

Apple and Amazon are two of the biggest success stories in corporate America. From a product perspective, Apple did not invent computers, nor did Amazon invent e-commerce. Plus, Amazon was among the pioneers in the e-commerce space. However, Tesla did not invent electric cars.

Although electric vehicles (or EVs) have been around for quite some time, Tesla has mainstreamed them. For years, EVs were the poor cousins of ICE (internal combustion engine) cars for automakers. Not many automakers were interested in selling more EVs, nor were many consumers interested in buying one. EVs were, at best, a niche segment.

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Where Tesla stands against Apple

Apple revolutionized the computer industry. Although there may be differing accounts, Apple has several “firsts” to its name. In general, Apple products are pricier compared to its peers. The Apple brand attracts a lot of consumer loyalty, and there is a lot of fanfare around any new Apple product launch. From that perspective, one could compare Tesla with Apple.

Tesla has revolutionized the electric vehicle market, and most Tesla car owners love their cars. Furthermore, Tesla creates a lot of buzz in the new markets that it enters. New software updates also keep existing customers excited, and both Tesla and Apple make innovative and consumer-centric products. While investors see Apple as a tech company, Berkshire Hathaway (BRK.B) chair Warren Buffett sees it as a consumer company.

Tesla versus Amazon

In some ways, Tesla is also similar to Amazon in its earlier years. Notably, Amazon is among the few e-commerce companies of the 1990s that survived the dot-com bust. Some observers are dismissive of EVs’ potential. Similarly, many ridiculed the e-commerce sector in its early days. However, Amazon not only managed to survive—it thrived. Amazon and e-commerce simply made life simpler for consumers.

Amazon continues to innovate, adding new consumer-friendly features in its overall value proposition. From a valuation standpoint, Amazon’s market capitalization far exceeds brick-and-mortar giants like Walmart.

Notably, some observers who are bearish on Tesla stock scoff at its high market capitalization. For example, Tesla has a higher market capitalization than Ford’s, although Tesla sells a lot fewer cars than Ford.

Tesla’s software, which includes autonomous driving, has been one of its core strengths. Tech giants Apple, Amazon, and Alphabet (GOOG) are also investing in autonomous driving technology.

ICE carmakers

Amazon’s success forced brick-and-mortar chains to bet aggressively on e-commerce. However, they might be a little too late to take on Amazon.

A similar analogy could be drawn between Tesla and the ICE carmakers. Not many car companies focused on EVs at first. Now, almost every automaker is betting on vehicle electrification. That said, Tesla cars continue to be the gold standard for other EVs. Now, can established automakers be “Amazoned” by TSLA? Stay tuned, as we’ll address that question another day.


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