Ford v Tesla
The battle of Ford (NYSE: F) and Tesla (NASDAQ: TSLA) is very much a tale of old versus new. Tesla has disrupted the motor industry and companies like Ford are playing catch up. In recent times the electric vehicle battle between them has heated up, evident in the promise of a tug-of-war between the Cybertruck and a Ford F150.
Ford was founded in 1903 by Henry Ford in Detroit and has struggled of late, with revenue down 3% year over year on the sale of 2.4 million vehicles. Tesla’s Cybertruck will have to compete with the Ford F-Series pickup which was the best selling pickup truck in the US for the 43rd consecutive year and is Ford’s best selling category. They have also released an electric pickup truck, the Ford F-150. Nevertheless, Ford’s share price has been under pressure, down by roughly two thirds in the last 5 years.
Ford is working with charging companies to build the FordPass Charging Network which it claims will be the largest network of chargers in North America. Ford has also entered into strategic partnerships with other auto companies like Volkswagen to increase the move to electric vehicles and autonomous driving.
Tesla is the first mover in the electrical vehicle space and has one of the most well known brands and CEOs in Elon Musk.
Tesla continues to innovate and perhaps one of its most valuable tools is the data collected from their 3 billion miles in Autopilot mode which is significantly more than their main competitor, Google-owned (NASDAQ: GOOG) Waymo in this space. Tesla also continues to work on its energy business and solar glass roofs through its subsidiary SolarCity. The preparations for the new factory in Berlin-Brandenburg are underway where they will produce vehicles for the European market. The Shanghai factory opened in 2018 to increase the production of batteries and Model 3.
In 2019 Tesla sold 367,500 cars, 50% more than the previous year and released the cybertruck. However, Tesla has struggled with profitability and has yet to have a profitable year. The lack of profitability is a major question mark over Tesla and the number of cars produced is significantly lower than other automakers.
Ford has a great deal of work to catch up with Tesla in the electric vehicles market but Tesla has a lot to prove and whether it can operate as a profitable business remains to be seen.
Nike v Lululemon
The athletic apparel market has grown rapidly in recent years and with a shift towards healthier lifestyles, these brands have benefitted hugely and will continue to grow provided they can adapt and execute their vision.
Nike (NYSE: NKE) was founded in 1964 as Blue Ribbon Sports and renamed Nike, Inc in 1978. Nike is arguably the leader in this space with the apparel section of Nike accounting for 31% of Nike’s revenue with footwear making up 65%.
Nike operates 1,152 stores worldwide which is almost triple the amount Lululemon (NYSE: LULU) operates. Nike reported they had to close its stores in China due to COVID-19 and revenues were down 4% where they had seen double-digit growth for 22 consecutive quarters. However, strong online sales offset these closures with an increase of 36% for the quarter. Nike’s strong online presence may help to lessen the impact of store closures in the US, and Europe, where the majority of their revenue comes from.
Nike aims to consistently generate high single-digit revenue growth through 2023. Nike’s gross margin decreased but remains at an impressive 44.3%. Nike has partnerships with some of the largest teams and sports in the world such as the NBA and individuals like Cristiano Ronaldo and former NFL Quarterback Colin Kaepernick.
Nike has not provided guidance for the current quarter due to COVID-19.
Lululemon was founded in 1998 in Vancouver, Canada and is a premium yoga and apparel company. At the end of Q4 2019, they operated 491 stores worldwide.
They have a three-pronged 2023 approach. International revenue increased by 25% and China increased by a staggering 70%. Lululemon has historically been targeted at women’s products however, they have made advances into the men’s market with a 32% increase in revenue in Q4 of 2019. The third core focus is digital revenue, which increased by 41%. Lululemon believes that this growth approach will serve them well in the coming years. Lululemon’s net margin is an impressive 55.9%.
Lululemon have not provided guidance for the fiscal year 2020 due to the Covid-19 outbreak but CEO Calvin McDonald has stated that he believes their strong position will allow them to “regain momentum” once the stores re-open. Time will tell whether they can maintain their growth in a tough economic environment in the future.
Both Nike and Lululemon have positioned themselves well to prosper in the future even with short term headwinds such as Covid-19.
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Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.