Chachi’s Words of Stupidom

Consumer Reports earlier this month named the Ford Mustang Mach E their Electric Vehicle “Top Pick” of the Year which surprised many car enthusiasts – especially considering it unseated from the throne Tesla’s Model 3. While Tesla and Ford are both car companies, they’re viewed very differently by Wall Street. Ford is a legacy manufacturing company while Tesla is a sexy tech company.

As of 2/17, Ford has a Market Cap of $70 billion, while Tesla’s market cap was $900 billion, making Tesla effectively 13x more valuable than Ford. Even though Ford manufactures in excess of 6 million cars a year and Tesla only produced about 500,000 in 2021, the PE ratio for Ford is a paltry 3.94 compared to Tesla’s 188.4. Ford’s PE ratio is worse than most broadcast companies. I must say that I own both stocks but I find neither of their valuations logical.

I find Ford’s conundrum very similar to that of radio. Much like Ford, we are dramatically undervalued as an industry compared to tech companies in the audio space like Spotify and Sirius. Our services are symmetrical and we have more listeners, but time and time again, investors will pay through the nose for potential growth and underpay for value. Thus, we find ourselves in a tough position from an investment perspective.

The fact that Ford has built a better electric vehicle in the eyes of Consumer Reports is a big deal because it proves you can’t count legacy companies out. Many do fail – like Sears and Pontiac – but much like Ford, if we continue to innovate and ultimately create incredible audio, we will persevere. I do not expect Tesla or Spotify to fall to the wayside. but I do not expect every streaming company and electric car company to survive, either. The cream will always rise to the top.

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