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Tesla’s stock continues to race full speed ahead. The stock is up more than 14 percent so far this week. Since the beginning of the month, shares have jumped about 32 percent.
The numbers keep going up. In the current quarter, 75 percent higher and counting, and in the past 6 months, 120 percent … in 2020 so far, it up 350 percent.
It seems nuts, especially when you remember that competition is coming from all sides. Other auto giants like Ford and GM are building and releasing flashy new electric cars, and disruptor hopefuls like Nicola, Fisker, and Canoo (which just announced that it will go public) are all coming for Tesla’s customers too. But Tesla investors aren’t worried, and many don’t think the price action is crazy. In fact, they think it’s set to keep running higher.
In the past 12 months, Tesla stock has gained about 760 percent. Let’s review three factors that are driving the shares of Tesla higher.
First of all, many investors are saying, “it’s likely to be included in the S&P 500 sometime in the next couple of months”, that will drive more fund managers to buy the stock. At the same time, Tesla shares will go through a five for one split at the end of this month. So people who hold this stock at the end of this week will participate in that.
That will bring the average price for a Tesla share down to somewhere in the USD $350 to USD $400 range and the belief is that at a lower price point, more retail investors will then buy the stock and push it higher.
The second thing driving this stock higher — the performance of the company. It posted a profit again in the second quarter, it is doing well in China, sales are strong, and so people are looking at Tesla and saying “these guys dominate the electric vehicle market right now”. When you say electric vehicles, you think Tesla.
Tesla has become the Kleenex of the electric vehicle market and that’s expected to continue growing.
Elon Reeve Musk FRS is an entrepreneur and investor. He holds South African, Canadian, and U.S. citizenship and is the founder, CEO, and lead designer of SpaceX; co-founder, CEO, and product architect of Tesla, Inc.; co-founder and CEO of Neuralink; and co-founder of PayPal.
The third factor, Elon Musk. People are looking at him and saying he’s had success at SpaceX, he’s had success at Tesla. I like what he’s doing. He may be controversial but I want a piece of that.
Well, there’s no shortage of people who are saying “you gotta buy Tesla”, “you gotta get in now.”
There’s an equal number of people who are looking at shares of Tesla and the fact that they’re up 25 or 30 percent in a week or a month and they’re saying, “this is nuts.” The reason they believe it’s nuts is because it’s hard to put an accurate valuation on Tesla’s future profits.
People look at Tesla and they say “yes it’s growing but they’re only gonna sell maybe a half-million vehicles this year” compare that with GM or with Ford who are selling 10 times as many vehicles.
The difference between Tesla and established automakers, it’s the growth potential. Tesla is growing quickly, especially in China, and its global market is continuing to expand. People look a that and say “yeah, it’s a rich stock, may not have a valuation that makes sense, but I want a piece of that!”
As for Elon Musk, his personal wealth has increased by nearly $8 billion so far this week, due largely to the soaring stock. Overall, Musk’s net worth has grown by $57.2 billion this year, the second-largest gain behind Jeff Bezos’ $73 billion increase.
This makes him the fourth-richest person in the world, according to the Bloomberg Billionaires Index.
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