The electric car manufacturer, Tesla grew 500% in 2020 and is by far the most valuable car manufacturer in the world, despite its far less production than Volkswagen, Toyota, or General Motors.
Wall Street announcement of including Tesla in S&P 500
The technology company is currently under $6 billion to reach a market value of 500 billion USD and continues to grow after Wall Street announced that it will be included in S&P 500 on December 21st. The pronouncement has forced index funds to buy billions of dollars of Tesla’s stock.
Naturally, the choice of global investors has increased by more than 6% given the recent 6% rise. Tesla stock continues to show an upward movement in a recent trading session ahead of the December inclusion in the S&P 500 (SPX). From its previous market value is 494 billion dollars, Tesla’s market cap rose to 570 billion USD on Tuesday, slightly higher than Warren Buffett’s Berkshire Hathaway market cap of about 54 billion USD.
Tesla posts more growth compared to Berkshire
Electric car company owner, Elon Musk, is growing more than 500% this year in shares, whereas Berkshire only showed a rise of less than 2%. Tesla’s high market capitalization this year is setting a record. Last year Tesla was far below Berkshire which made 255 billion USD in revenue with more than ten times the 25 billion USD revenue of Tesla.
At the end of March, Buffett’s company had enough money to buy Tesla directly, as the automaker’s market capitalization at the time was less than 100 billion USD.
Last Tuesday when Tesla’s stock rose another 4% to reach a market cap of $570 billion, it has exceeded Warren Buffett’s market value for Berkshire Hathaway of 542 billion USD.
Tesla’s high market value reflects more than 500% of its stock value growth since the beginning of the year. The stock was traded for less than a tenth of its price as of October 2019.
However, Berkshire’s below 2% stock price this year is a loss of the 3.7% return on the Dow Jones benchmark over the same period.
The market cap of Tesla which exceeds that of Berkshire with roughly 20 billion USD is dramatic given the difference in their scale and financial strength.
Berkshire owns several companies including See’s Candies, Geico, Precision Castparts, and Burlington North Railroad, together employing more than 390,000 people.
It also holds a portfolio of over 100 billion USD in Apple stock and over 1 billion USD in stocks from American Express, Bank of America, Coca-Cola, and other large corporations.
Buffett’s companies last year generated 255 billion USD in revenue and 73 billion USD in return on investment, generating a net income of 81 billion USD. Also, at the end of March, it equally has been 137 billion USD in cash and short-term investments, which was enough to buy the entire Tesla as the market value at that time fell below 100 billion USD because of the Covid-19 meltdown.
Meanwhile, Tesla had about 48,000 full-time employees last year, less than a quarter of Berkshire. Sales revenue was about $25 billion, a tenth of Berkshire’s sales and a net loss of $900 million. Musk’s companies also had a net worth of $6.6 billion last year, less than 1/60 of Berkshire’s $425 billion.
Tesla investors have projected that the company will post 23 times its sales in the past year. They are anticipating the incredible growth of the company and the potential for Tesla to dominate multiple markets with its technology and turn into a global leader. Nevertheless, it is surprising that at the present stage of growth, Tesla is worth more than one of the largest and most successful companies in the world.