Amazon stocks are dead money, while Teslas are up 8.5%

Tesla CEO, Elon Musk, takes boyish pleasure from surpassing Amazon Executive Chairman, Jeff Bezos, as the world’s richest person, reports the Wall Street Journal.

Does this mean you should buy Tesla and sell Amazon? A look at the stock charts of both companies suggests Amazon is stuck, while Tesla stock has been accelerating since bottoming out in May. However, both are lagging heavily behind the S&P 500.

I can’t predict the future, but it seems Tesla has upward momentum and Amazon needs a powerful catalyst to make it an attractive investment. In the battle of CEOs, Musk has a clear lead over recently-appointed Bezos successor Andy Jassy.

Until Amazon reports surprisingly rapid sales growth, Jassy could get caught up in operational challenges that could keep inventory in limbo.

(I have no financial interest in the securities mentioned in this post).

Musk vs Bezos

On October 11, Musk boasted that he was the world’s richest person and that day sent a tweet to Bezos featuring an emoji featuring a silver medal with the number 2 on it, a reference to Musk’s bragging that he overtook Bezos in the race to the title of the world’s richest person, the Journal noted.

Musk responded to a tweet from Bezos referring to a 1999 Barrons cover story that questioned Amazon’s survival thanks to its business model calling it a middleman.

Bezoss tweeted October 10: Listen and be open, but don’t let anyone tell you who you are… Today, Amazon is one of the world’s most successful companies and has revolutionized two completely different industries.

Forbes says Musk is worth $203.5 billion as of October 12, 7.4% more than Bezos’s $189.5 billion. These net worth estimates include their holdings in privately held companies such as SpaceX (Musk) and Blue Origin and the Washington Post (Bezos).

Stock Price, Earnings and Guidance

For those of us who don’t have the magic ingredients to occupy the top spot on the list of the world’s richest people, we may be able to increase our wealth by buying shares in their publicly traded companies.

Unfortunately, both stocks are lagging heavily behind the S&P 500 for the year, which is up about 17.9%.

A look at their stock’s performance in 2021 tells two different stories. Tesla is up 8.5% year-on-year after a nasty plunge, while Amazon appears to be dead money and is up just 1.7% this year.

Tesla peaked at $900 in January and fell 37% to $563 in May. Shares have since risen 41%, closing at $792 Monday.

Amazon, which started the year at $3,187, peaked for the year at about $3,731 as Bezos left and Jassy moved in. Since then, the stock has fallen 13% to about $3,240.

Tesla has a head start in revenue growth. For the quarter ended June 2021, revenue grew approximately 98% to nearly $12 billion, while net profit rose 998% to $1.1 billion.

The forecast for 2021 total deliveries, which will be affected by supply constraints, will grow more than 50% over 2020. Tesla is blowing through that number, just announcing a 73% increase in third-quarter deliveries of 241,300 vehicles.

Amazon’s last quarter with Bezos as CEO was less impressive. As I wrote in July, Amazon’s second-quarter revenue grew 27% to $113 billion, while Jassy predicted that third-quarter revenue growth of 13% would be a major slowdown. To be sure, Amazon reported net revenue growth of 48% to about $7.8 billion in the second quarter.

Simply put, Amazon has set a low bar for growth, while Tesla’s projected revenue growth is at least twice as fast.

What analysts say

Analysts are making it slightly harder for Amazon to beat expectations as they are more optimistic than Amazon’s forecast for the current quarter. They expect growth of 16.1% for the third quarter and even slower 13.7% growth in the last quarter of 2021.

To be fair, Amazon is likely to enjoy a record quarter. It started the Christmas shopping season early, plans to hire 450,000 employees and is expanding its presence.

Unfortunately, unless Amazon reports growth that exceeds Wall Street estimates, it will fall far short of the 27% annual growth it has enjoyed over the past decade and its stock will lack a catalyst.

Tesla stock can rise significantly. a bullish Looking for Alpha report suggests it will reach $2,500 by 2030. Who knows if that will happen?

To be fair, Tesla is a leader in the fast-growing EV industry that is winning customers from manufacturers of vehicles with internal combustion engines.

Tesla enjoys many competitive advantages such as its approach to marketing, sales, software development, battery manufacturing, supercharging, design, development and manufacturing, making it the global EV market leader with a share of approximately 14.6%, notes SeekingAlpha.

For the third quarter, revenue is expected to rise 54% to $13.49 billion, according to the consensus. However, SeekingAlpha expects Tesla to report $14.74 billion in revenue, 9% above consensus and 68% above the $8.77 billion in revenue it generated in the third quarter of 2020.

My Take

While Musk is a more entertaining leader than Jassy, ​​neither Tesla nor Amazon come close to beating the S&P 500. Tesla is growing much faster and has a greater chance of exceeding expectations than Amazon.

If Jassy has another new company for Amazon along the lines of AWS that he’s credited with helping create, it could be years before Amazon can restore the 27% revenue growth it’s had at Bezoss for the past decade.