Tesla has surpassed Toyota to become more valuable than the Japanese carmaker, but Tesla isn't actually worth more. (TSLA)

• Tesla surpassed Toyota in market capitalization last week, making the electric-car company the world's most financially valuable automaker.
• Tesla had already surpassed General Motors, Ford, and Fiat Chrysler to become the most valuable carmaker in the US.
• But is Tesla really worth more than Toyota?
• Of course not. Toyota has been extremely valuable for decades, while Tesla has only recently been deemed exceptionally valuable by investors. Tesla must remain valuable for decades to genuinely surpass Toyota's achievement.
• Visit Business Insider's homepage for more stories.

Tesla is worth $206 billion. Toyota is worth $203 billion.

But in 2019, Toyota sold just under 11 million vehicles, while Tesla sold ... less than 300,000.

What gives?

It's all about the future. Investors are betting, big time, that Tesla will vindicate a $1,208-per-share price (the price at which company shares closed on Thursday, July 2) in the future, by growing and growing and growing some more, offering an enviable profit margin to go along with rising revenue.

Toyota, meanwhile, is mature. Huge, but old. Its growth days could be over.

Still, is Tesla really worth more than Toyota? 

Nope. Here's why:

TIME. Toyota has been worth a lot for a long time. Forgetting about the critical difference between Toyota's value as a business and its stock-market value, the company has been a a tremendous store of value for decades. Tesla has been considered a similar store for much, much less time.

EXECUTION. Toyota's profit margins are less than 10%, and given the state of the global auto market, it can't look forward to tremendous growth. Investors value Toyota based on its ability to execute year in and year out.

GROWTH. Tesla's surging value is a big bet that a sustainable energy and transportation company could be highly profitable in the future. Toyota's investors also expect future profits, but in the context of a predictable, steady business.

See the rest of the story at Business Insider

See Also:

• I flew out of the new LaGuardia Airport terminal 2 weeks after it opened and couldn't believe it was the same airport I hated. Here's what it was like.
• The $397,000 Ferrari F8 Spider is a majestic summary of everything great that the Italian carmaker can do
• Car sales have plunged during the coronavirus, but not at Tesla — skyrocketing the company's status as the world's most valuable automaker

FOLLOW US: On Facebook for more car and transportation content!

from Business Insider https://ift.tt/38wamjS