In 2020 for the first time in history, a company made it to the $1 trillion market capitalization. This company was Apple, which has been vying for the top spot against Amazon and Microsoft since. This past decade has seen exceptional growth in the United States stock market. With any growth period, there are always companies that get caught up in the hype. It seems that Tesla (TSLA) is one of those companies. Tesla is now the 11th largest company by market capitalization amongst companies like Apple, Alphabet, Amazon, Visa, Berkshire Hathaway, and Walmart.

The Market Cap List

The list of the top eleven U.S. companies by market cap is as such:

1. Apple $1.892 trillion (AAPL)
2. Microsoft $1.537 trillion (MSFT)
3. Amazon $1.529 trillion (AMZN)
4. Alphabet $985 billion (GOOGL) (GOOG)
5. Facebook $715 billion (FB)
6. Berkshire Hathaway $500 billion (BRK-A) (BRK-B)
7. Visa $421 billion (V)
8. Walmart $389 billion (WMT)
9. Johnson & Johnson $375 billion (JNJ)
10. Procter & Gamble $339 billion (PG)
11. Tesla $339 billion (TSLA)

Therefore Tesla is amongst giants that have been around for decades. To note is that Tesla's valuation closer to companies six through ten than the first five, as the first five have a market cap at least double Tesla's.

Tesla Lacks Where The Other Companies Excel

What separates Tesla from these other companies? It is the fact that all of the other companies have very stable core businesses supplemented by high growth side businesses. Alphabet, for example, has grown to be very successful based on Google Search & advertising then purchased YouTube. Now Alphabet is using that core base business to power innovation and growth through "other bets". The ability to use capital from a very established business has afforded Alphabet to focus on high growth opportunities like autonomous vehicles. This same attribute applies to Apple with iPhones and Services, Amazon with Amazon Marketplace and AWS, & Microsoft with Windows/Office Suite and Azure Cloud.

But Apple, Microsoft, Amazon, and Alphabet are over three times as large as Tesla according to market cap. This is rightfully so, but let's look at some better comparisons. In this case, we'll use Berkshire Hathaway, Visa, and Walmart. So, what do these companies possess that Tesla doesn't? Well, Berkshire Hathaway has very established, very stable businesses, and growth is powered by internal efficiency and acquisition. Visa and Walmart also have these strong core businesses that have built up over time. Visa is the number one card issuer in the world and has a very strong underlying trend of a worldwide increase in cashless payments. On top of this, Visa has margins that are crazy, sporting a 49% net margin. As for Walmart, it is the largest retailer in the United States by a long shot, more than triple any other retailer in the country. Walmart has also avoided the retail plague and has fostered very strong online sales growth over the past years.

On the other hand, Tesla is still working on creating that solid core business like these other companies. In 2019 Tesla had a 16% share of the global electric vehicle marketplace and around 80% of the U.S. electric vehicle marketplace. But of the total auto sales, Tesla only has a 1.3% market share. But the growth of Tesla is projected to be very high, powered by the electric vehicle and solar industry. Tesla has grown revenue from Tesla vehicles by a CAGR of 68% per year over the last decade, and the electric vehicle market is expected to grow at a double-digit clip. If Tesla can take advantage of this growth in electric vehicle demand, it could create a cash cow core business just like the other companies. But as of today, Tesla is not even close to having the same overall market as a Walmart or Visa.

Another issue with Tesla is that the company does not make any net income and has not since the founding of the company. All nine of the other companies are very profitable. Tesla's net loss in 2019 was $862 million. Compare this to Walmart, which posted net income of $14.88 billion, or Visa, which posted net income of $12.08 billion. The same is true for revenues as well. Tesla saw revenue of $24.58 billion in 2019, but this is measly compared to Walmart at $523 billion and Berkshire Hathaway at $254 billion. So has Tesla really earned the same valuation that these very established and profitable companies have due just to expected growth rates? That seems to be the case and to me, and it somewhat mirrors the dot-com bubble line of thinking.

Conclusion

As of writing, Tesla is the 11th largest company according to market cap. This is a slide from the 8th position earlier this week after a 10% decline in the stock price over the past couple of days. It is in the peer group of companies such as Apple, Amazon, Walmart, Johnson & Johnson, and Visa. There are major differences in the ten other businesses, such as having a very stable core business surrounded by growth opportunities. On the other hand, Tesla is trying to create that core business within the high growth electric vehicle market. Does this mean that Tesla should be valued on the same level as Walmart or Berkshire Hathaway? The answer is an obvious no to me. Tesla hasn't even provided net income in any year yet. Therefore, what you're buying is a growth rate that is suspected by unrealized. The valuation of Tesla is just $50 billion lower than Walmart's. Walmart is a company that creates net income greater than half of Tesla's current revenues! Earlier this week, Tesla had the 8th largest market cap in the U.S., meaning that it was valued higher than Walmart at one point. Overall, the market cap that Tesla is trading at currently makes zero sense. It seems to me that all the value of the company is really reliant upon future growth prospects that may not even turn out as expected. This is in comparison to the ten other companies that have proven business models, profitability, and future growth opportunities.