Bernstein analysts have debated the $649 billion gap in market capitalization between Tesla Inc. (NASDAQ:TSLA) and Chinese EV giant BYD Co Ltd (OTC:BYDDF).
What Happened: The analysts argue that BYD is a wiser investment despite Tesla’s 120% share price surge in 2023. They are struggling to justify the valuation gap, considering the companies’ similar revenues, EV sales, and profits, Forbes reported.
Despite a year-to-date decline in earnings, Tesla’s market cap sits at around $730 billion. In contrast, BYD, whose profits more than doubled this year, is valued at $84 billion.
They questioned why the companies, seemingly heading in “opposite directions” of growth, continue to trade at starkly different levels.
Why It Matters: Tesla and BYD, despite having similar financial trajectories, have seen a stark contrast in market valuations. This raises questions about whether the market is overvaluing Tesla’s potential or undervaluing BYD’s achievements. Bernstein’s analysis highlights the potential for a market correction, which could see a convergence of valuations.
Warren Buffett’s Berkshire Hathaway holds an 8% stake in BYD, which is listed on the Hong Kong Stock Exchange.
Meanwhile, Tesla’s global EV deliveries for the third quarter of 2023 only slightly exceeded those of BYD.
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