By on July 2, 2020

With the automotive industry seeing losses across the board, most investors could do nothing but watch in horror as sales reports showed the post-lockdown recovery had not yet begun. But there was a faction that ignored the carnage taking place around them and continued to pump money into their preferred auto brand until it became the most valuable automaker in the world.

While it’s a sin for you not to know, we are obviously discussing Tesla Motors — the infallible, gleaming beacon of modern-day motoring.

The firm officially surpassed mega-giant Toyota on Wednesday, with shares trading as high as $1,228 before tapering off in the evening with a market cap of around $220 billion. 

Investors going mental over electric vehicle companies is nothing new. We’ve tracked Nikola’s valuation for a while, and it seems to be completely at odds with anything that makes sense — especially considering it doesn’t produce anything. Tesla also benefits immensely from hype that’s often encouraged by CEO Elon Musk. However, Tesla has the added benefit of selling cars, even if it cannot do so at same pace as Toyota.

According to Tesla’s latest sales report, the firm produced around 90,600 vehicles in the second quarter, with the automaker claiming it has reached pre-pandemic production levels at its main facility in Fremont, California. While healthy numbers for a modestly sized automaker fighting with the local government to keep the factory doors open, Toyota’s production dwarfs the EV company by an almost comical degree. Yet Toyota didn’t surpass its own weak projections, reporting a 35-percent decline for Q2 vs last year.

Market Watch quoted Wedbush analyst Daniel Ives as trying to rationalize the stock disparity. His firm had already upped its price target on Tesla before sales reports manifested. Now it suggests shares could go as high as $2,000.

“In our opinion, a 90,000 delivery number in this COVID lockdown environment is a jaw dropper and the bulls will run with this as a potential paradigm changer moving ahead,” Ives said. “We believe that the China growth story is worth at least $300 per share and $400 in a bull case to Tesla as this [electric vehicle] penetration is set to ramp significantly over the next 12 to 18 months, along with major battery innovations coming out of Giga 3 [in Shanghai].”

Seems like a lot of speculation, but there’s not shortage of anecdotal evidence that Tesla shares seem untethered from the rest of the market. Perhaps $2,000 per share isn’t as impossible as it sounds.

 

[Image: JL IMAGES/Shutterstock]

 

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15 Comments on “Tesla Now the Earth’s Most Valuable Automaker...”


  • avatar
    SCE to AUX

    Their stock price makes no sense.

    Even though any sales figures during COVID should be footnoted, Tesla was the #9 brand in the US YTD 2020. That’s a far cry from the 2500 Roadsters they sold a decade ago.

  • avatar
    subuclayton

    Does that include income from the rocket boosters? Or is that completely separate from the auto operation?

  • avatar
    ToolGuy

    Is it too late for me to pick up a few shares at ~$400? [ex. December 2019]

  • avatar
    stuntmonkey

    Rationality has taken a holiday during the pandemic. Similar story over at Hertz:

    https://www.npr.org/2020/06/24/883047437/owner-of-a-broken-hertz

  • avatar
    SoCalMikester

    eventually, the majors are going to have competitive vehicles and TSLA just wont be worth as much. then again, their home battery grid solar thingie has some potential.

    my 401k went down a bit, switched it to 40% for a while while it was cheap.

    • 0 avatar
      SCE to AUX

      The majors have spent the last decade producing half-hearted attempts at EVs. When you lose money on EVs and print money making ICEs, it’s hard for the bean counters to justify a competitive EV program that will catch Tesla.

      They will never do it because they simply can’t take the risk.

  • avatar
    bunkie

    It’s not just about cars.

    It’s about batteries, a power distribution, solar energy and the end of fossil fuels for many applications should they succeed.

    Consider this:

    If Tesla succeeds in introducing a million mile battery, the the battery will outlast the car. At that point, Tesla can sell you the car and lease you the battery. That cuts the entry cost for electric cars by almost 50%. Add to that the possibility of using you car battery to manage electricity use (both consumption and resale on the spot market) and Tesla’s innovations such as the solar roof and the upside is way, way bigger than any regular car company.

    Having said all that, the stock is overpriced, perhaps by a huge margin. But given Tesla’s track record, it looks like they might very well succeed.

    • 0 avatar
      mcs

      “It’s not just about cars.”

      Wait until they break into producing batteries for consumer devices. They’re also branching into pharmaceutical manufacturing through their Tesla-Grohman division. They’re partnering with CureVac for the equipment to manufacture their corona virus vaccine.

      I think they’re going to end up being a large conglomerate that manufactures cars in one division. Sort of like Amazon evolving from being an online bookseller to an online shopping powerhouse.

      The legacy companies just won’t have the resources to compete soon. Look at the legacy companies that failed in other markets. Kodak with imaging. Barnes and Noble in books. Sears Roebuck.

  • avatar
    Master Baiter

    It’s a risky bet:

    Elon could die in a helicopter crash next week.

    They could have a major battery safety incident requiring a massive recall.

    etc.

  • avatar
    schmitt trigger

    It is the well known effect known as a paradigm shift.

    A lecturer once mentioned that if the railroad barons had realized that they were not in the railway business but in the people and freight transportation business, nowadays there would be Union Pacific Airlines and Santa Fe Trucking.

  • avatar
    TimK

    Party like it’s 1999. How many owners of TSLA shares even remember Jan-Mar of 2000? The Earth was reborn, a new “paradigm” (Internet) was rewriting and displacing the old rules. We had people telling us that endless prosperity lay before us, and in a few years work itself would be obsolete.

    How’d that turn out for shareholders of those myriad companies that never turned a dime of profit?

    • 0 avatar
      Steve S.

      I was there. A lot of stupid ideas were hyped because the companies had “.com” in their names.

      I wish I bought Amazon when people were saying that $500 a share for a company that never turned a profit was insane.

      I didn’t make that same mistake twice. I bought TSLA at $520. Sold it at $800. Bought it again at about $650. Sold at $1000. Bought again at $1100. Hanging on to it and watching it by the day, and the hour.

      I could buy an actual Tesla with what I made on the stock.

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