Tesla’s share price has jumped by 40% in just two days. The leap follows one analyst’s claim that the electric car maker could soon be worth £1 trillion…
An Extraordinary Spike
On Tuesday, Tesla’s share price reached $912. That left its overall market value at $164 billion. For perspective, that’s more than the combined $104 billion value of Ford, Chrysler and General Motors; the ‘big three’ of Detroit. Overall, the electric car manufacturer’s share price has doubled since December. The company has reported stronger than expected sales and excitement is building that it may continue to strengthen its lead on traditional automakers.
As it stands, Tesla is now the second most valuable manufacturer of cars in the world; behind Japan’s Toyota, currently worth $227 billion. This is extraordinary, considering the former sold 367,200 cars last year in comparison to the latter’s 10.7 million. It’s even more startling when you consider that Tesla has never made an annual profit. It even lost $862m in 2019.
Market bulls expect Tesla’s rise to continue, expecting it to dominate the EV market and benefit from upcoming government bans on new diesel and petrol car sales. Catherine Wood, the chief investment officer of ARK Invest, believes that buying Tesla’s stock is a “no-brainer”. ARK expects its share price to reach $7,000 by 2024. If so, that’d give it a market value of $1.3 trillion; just behind Apple’s $1.4 trillion.
Not everyone’s convinced though, and some continue to insist that Tesla’s share price is grossly overvalued. Craig Irwin, an analyst with Roth Capital, emphasised his own dismay. He told CNBC, “I just can’t believe this freaking stock. It’s insane. this is a big separation from those of us who like to pull out the calculators and look at reality”. For Wood though, Tesla’s competitiveness is only just emerging. She told Barron’s Market Brief, “the electric vehicle is going to drop below the price of a gas-powered vehicle, like-for-like, within the next 18 months to two years, and then will continue to fall. So it’s going to be a no-brainer”.
Ark believes that electric cars sales will represent a third of the overall total by 2025; and that Tesla will dominate the market. It expects the company to sell 3.2 million cars a year by 2024 in its ‘worst-case’ scenario. Analysts with JP Morgan, however, have urged restraint. They said, “we continue to urge caution with regard to Tesla shares, which appear highly overvalued based on our understanding of the fundamentals”.
Payday For Elon Musk
If Tesla’s share price rise is extraordinary, so too is CEO Elon Musk’s potential pay packet. He’s on his way to secure $50 billion in the largest pay deal ever struck in the corporate sphere. Musk is already the 22nd wealthiest person in the world with a $41 billion fortune. He’ll collect his ‘bonus’ if Tesla reaches a valuation of $650 billion by 2028.
What’s Going On?
Analysts and experts will be debating Tesla’s share price, and the company’s rise, for years to come. For some, the company is extraordinarily overvalued based on its manufacturing woes, limited sales and inability to reach profitability. For others, the company is the driver of the next ‘big’ technological push; rendered not only desirable, but necessary, by the Climate Crisis. Some, however, might see Tesla’s valuation as a sign that goes beyond the company’s size, operations or prospects. It represents a belief that the company’s message, and electric cars, are the future.
No car manufacturer has, at its head, such a colourful and divisive character as Elon Musk. Love him or hate him, he’s managed to create around himself a Tony Stark-like narrative; a pioneer of science and technology, driven by more than just corporate greed. This has won him a cult of personality, illustrated by his enormously popular (and controversial) Tweets. But the company has also benefited from the mistakes of other legacy automakers. These, for far too long, turned their noses at electric vehicles and are now having to play catch up. Tesla has also been bold enough to venture far from the industry’s staples; pursuing the model of a tech-company and directly owning it stores, instead of relying on private dealers.
Will Tesla justify its share price and attain profitability? It’s too soon to tell. But it is currently defying sceptics and making the case for lower-emission mobility. Given that this was always its raison detre, it’s arguably already succeeded.
Tesla Is Now Worth $100 Billion, Putting It Ahead Of Volkswagen – https://autoserve.co.uk/motoring-news/tesla-is-now-worth-100-billion-putting-it-ahead-of-volkswagen/
Debunking Electric Car Myths – https://www.autoserveclub.co.uk/blog/debunking-electric-car-myths/
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