Tesla stock trades at a higher price per share even though Apple generates a lot more revenue and net income than Tesla does. You may be wondering exactly why Tesla stock is more expensive than Apple.
Why is Tesla Stock More Than Apple?
Tesla has fewer outstanding shares than Apple does and the company trades at a higher P/E ratio due to its expected growth in the future. That’s basically why Tesla stock trades at a much higher price.
Tesla CEO Elon Musk believes that Tesla could be worth more than Apple and Saudi Aramco combined if the company executes.
If Musk is right then TSLA shares may trade far higher than Apple stock over the next few years.
Tesla Has Fewer Outstanding Shares Than Apple Does
Companies with fewer shares outstanding tend to have higher stock prices on average. Let’s take a look at the shares outstanding of Tesla vs Apple. You will notice that Apple’s total share outstanding count outnumbers Tesla’s by 5 to 1.
When a company issues a large number of shares, the company’s stock price usually costs much less due to a higher supply. Apple’s total shares outstanding is significantly high, which makes each share worth less.
Share Buybacks Increase Stock Prices By Reducing The Number of Shares Outstanding
Stock splits increase the number of shares outstanding but management may buy back shares of its own stock to reduce the shares outstanding. This strategy is a smart way to return value to shareholders because fewer shares outstanding make each individual share worth more.
Tesla CEO Elon Musk hinted at a Tesla share buyback in 2023 of around $5 to $10 billion in the company’s Q3 2022 earnings call. This would help TSLA stock increase in value and make it much more expensive than APPL shares in the future.
Tesla has fewer shares outstanding and plans to buyback its own stock to reduce the number of shares even further. This is the exact opposite of what Apple is currently doing. Apple CEO Tim Cook seems happy to only update Apple’s core products and pay a small dividend.
I believe Tesla stock has a lot more growth in the future because the company continues to innovate. Apple’s best days may already be behind the company so don’t expect a massive share price increase anytime soon.