Tesla Now the Earth's Most Valuable Automaker
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]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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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.
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?