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Tesla Motors Inc (TSLA), Ford Motor Company (F): Autos Are a Necessity, But the Market Doesn’t See It That Way

The company is expected to release its fourth-quarter results during February and has said it would build a minimum of 20,000 Model S sedans during the year at its California factory. It also plans to add the Model X electric sport-utility vehicle in 2014. The company is planning to earn a profit from the Model S during this year.

Elaine Kwei, an analyst for Jefferies, “After digging into the background behind the article, our conclusion is that operator error likely played a primary role, due to improper charging protocol.”

Europe dominating auto outlook

The Goodyear Tire & Rubber Company (NASDAQ:GT) shares dropped about one percent after it announced that its operating income for 2013 would be lower than its earlier forecast as it tries to revamp its European operations. The company expects to earn $1.4 billion to $1.5 billion in operating income during the year, which is lower than its earlier forecast of $1.6 billion as the requirement for tires decreased with fall in auto production in Europe, representing worst auto-sales slump in 19 years. Various other automakers such as General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) have planned to shut down their European plants.

In January 2013, the car sales in the European Union fell to the lowest level with Ford Motor Company (NYSE:F) and Peugeot Citroen displayed the biggest drop due to the economic contractions in the southern part of the region increased to Germany and France. Both the companies are planning to reduce 30,000 jobs jointly and shut down five plants. Ford has estimated that its loss in Europe would increase to $2 billion in 2013 from $1.5 billion in 2012. Its sales fell to 61,544 vehicles in January 2013.

General Motors reiterated break-even expectations for Europe by mid-decade, as it reported losses in Europe that was more than doubled as compared to 2011 and expected that the market would fall further in 2013. In 2012, the company’s net income fell by 33% to $6.19 billion from its record level in 2011. While its pre-tax losses in Europe increased to $1.8 billion, finishing on the vertical end of the company’s October forecast.

Valuation

Going by financial metrics only General Motors is attractive:

F Ford 2.95 0.37 2.64 12.47 5.34
GM General Motors 10.44 0.29 1.04 41.4 0.4
GT Goodyear Tire & Rubber 18.31 0.16 2.81 9.57 4.86
TSLA Tesla Motors NA 28.81 NA NA NA


Data from FinViz.com

Goodyear and Ford are too levered to consider as prudent stock investments. Unfortunately, General Motors is also not a compelling investment. Yes, it trades at low price multiples. However, it is levering up and the operations recently went through bankruptcy. These do not bode well for stability.

Unfortunately, Tesla is, well, shocking. It has a negative equity value and has negative free cash flows and a net loss. Investors should not jump in at such a high price-to-sales multiple.

There are no compelling stock investments in this space at current prices.

The article Autos Are a Necessity, But the Market Doesn’t See It That Way originally appeared on Fool.com and is written by Bill Edson.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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