The automotive industry is highly competitive, with many brands and models to choose from. Similarly, investors have a wide range of automotive stocks to consider. Two companies that stand out in this industry are Tesla and Toyota. Although they are fundamentally different, they offer stability and balance to investors. Tesla is known for its innovative marketing and high growth expectations, while Toyota is known for its steady output and positive analyst sentiment.
These contrasting qualities are reflected in the behavior of their stocks. Tesla’s stock, listed as NASDAQ: TSLA, is known for its volatility and roller coaster-like movements. On the other hand, Toyota’s stock, listed as NYSE: TM, is seen as reliable and durable.
When looking at the academic definition of a stock’s behavior, known as ‘beta,’ Tesla has a beta of 2.07, indicating that it is expected to move more than the benchmark (typically the S&P 500). In contrast, Toyota has a beta of 0.57, suggesting that its movements are less volatile. This can be seen when comparing the stock charts of the two companies over a twelve-month period.
Over the past twelve months, Toyota has outperformed Tesla by 26.2%. However, over the past five years, Tesla has experienced a remarkable 1,346% increase, while Toyota has climbed by 45%. This difference in performance can be attributed to the shift in market preferences towards reliable earnings and cash flows, favoring established companies like Toyota.
Analysts from Jefferies Financial Group have projected a 4% upside for Toyota’s stock and a 9.6% downside for Tesla’s stock. Despite the overall decline in vehicle prices and tighter consumer budgets, Toyota’s business fundamentals continue to attract investor attention.
While Toyota is seen as a more stable investment, investors should also consider the potential for growth in Tesla. Analysts are projecting a 40.7% jump in Tesla’s earnings per share (EPS) for the next twelve months. However, there are risks associated with high growth expectations, including market saturation and fluctuations in lithium prices.
Building a balanced portfolio that includes both Tesla and Toyota can provide investors with stability and potential growth. Toyota offers steady growth and a low level of volatility, while Tesla offers the potential for high rewards. Additionally, Toyota provides a 2.2% annual dividend yield.
It’s important for investors to consider diversification and weigh the risks and rewards associated with each stock. While Jefferies Financial Group has a positive outlook on both companies, investors should carefully analyze their investment strategies and goals before making any decisions.
Overall, the comparison between Toyota and Tesla presents investors with different investment options in the automotive industry. Both companies have unique qualities that can contribute to a well-balanced portfolio.