Tesla Triumph Continues, Rising Share Price Pushes Market Valuation to Over USD 100 Billion

Tesla Triumph Continues, Rising Share Price Pushes Market Valuation to Over USD 100 Billion

Tesla’s share price is back at making headlines after it hit a record high on 22 January 2020. The Company, which is perhaps the world’s best and highest-selling pure electric vehicles giant, finished the trading session with a market cap greater than $100 billion for the first time. The consensus believes that this milestone sets CEO Elon Musk up for a major pay-out.

Tesla’s Stock Record

Just in the first month of the new decade 2020, Tesla’s stock has become investors’ favourite, and why not? Record production, record deliveries, a China expansion and with new models lined up for launch, the Company is easily one of the best ones in the contemporary and competitive business world.

On 13 January 2020, the stock stirred up NASDAQ trading, and was up by 2.3 per cent in premarket trading. After continuing to rise by almost 10 per cent, it finally settled at an all-time high of just a little over USD 524 per share. This marked another milestone- it had doubled over the past three months!

More recently, on 22 January 2020, (NASDAQ:TSLA) closed at USD 569.56 per share, a surge of 4.09 per cent relative to its last close. But what caught the media and market eye was its market capitalisation- which has surpassed the dreamy mark of USD 100 billion and currently is at USD 102.66 billion!

Here are a few interesting facts that one should be aware of when discussing Tesla’s stock record:

  • After passing the USD 100 billion mark, the Company is believed to having displaced Volkswagen as the world's second most valuable carmaker;
  • Tesla market capitalisation currently (USD 102.66 billion) is more than General Motors Company and Ford Motor Company combined (USD 86.32 billion);
  • Experts opine that the Tesla stock has risen by more than $200 per share since the company unveiled the Tesla Cybertruck;
  • CEO Elon Musk is likely to collect billions in pay tied to hitting the recently achieved target;
  • Market experts believe that approximately half of Elon Musk’s current net worth, which is over USD 30 billion, comprises of Tesla shares.

Factors Working in Tesla’s Favour

Given the records being set and hype encircling Tesla currently, one is bound to fathom the factors that might have contributed to this sudden upswing of the Company and its stock. Let’s screen a few possible events that might have propelled it-

  • Tesla recently launched the Gigafactory facility in Shanghai and has been successful in producing around 1,000 customer salable cars and begun deliveries in a short span of time.
  • Moreover, China has decided not to make any substantial cuts in subsidies for new-energy vehicles in July 2020, the period when it usually does. This is likely to work in Tesla’s favour, as China the largest market for mid-sized premium sedans and he biggest hub for the ground-breaking electric vehicles.
  • In the fourth quarter of FY19, Teslaachieved record production and record deliveries (105,000 and 112,000 vehicles, respectively). This result was exceptionally good and even exceeded the Wall Street expectations.
  • In 2019, the Company delivered approximately 367,500 vehicles, 50% more than it did in the prior corresponding period (2018).
  • It’s not just the stock that has been breaking records for Tesla. Tesla sold more cars in 2019 that 2017 and 2018 combined.
  • The Company has kept car fanatics engaged in it. It has always been a hot topic discussion for its existing cars and future launches.
  • In 2020, two vehicles are expected to launch- Model Y compact CUV and Model Y compact SUV.
  • Always a step ahead of its own race, the Company’s Model Y has already received its California Air Resources Board (CARB) certification ahead of the launch. This is a positive sign of Tesla’s potential range and imminent deliveries.

Tesla Attains Right to Sell Cars in Michigan

Apart from making headlines with respect to its stock performance and skyrocketing market capitalisation, Tesla achieved another milestone recently. After a multi-year legal battle, the Company has finally won the right to deliver and service cars in the state of Michigan.

The issues (discussed below) arose due to the dealership laws of Michigan, controlling the sale of vehicles. A state law in Michigan makes it compulsory for automakers to work with dealers to sell their respective vehicles. However, Tesla has been always known to sell its cars via company-owned stores.

The legal battle was to win the right to sell cars directly to consumers, as prior to this update, the Company was not allowed to discuss pricing or financing terms with potential buyers or open a service center to fix the cars in the state. Moreover, buyers had to travel out of state to take possession of Tesla cars, if they happened to buy them.

Amid the Boom, Are There Any Worries For Tesla?

Business is highly dynamic. Currently, we are exposed to a lot of economic turbulence and nervousness prevails in global economy. Be it the on-going US-Iran war, a settling but existing US-China Trade war, a Brexit in the coming few days and the US Presidential due this November and climate concerns- bushfires devastating Australia. The uncertainties have one re-think that the future is highly unpredictable for economies and businesses alike.

In this backdrop- is there any stance of worry for Tesla? Market experts believe that even though the fourth quarter numbers have been promising, Tesla has had very few profitability periods in the last decade and ever since it started trading. Consistency will be pressure that the Company will be facing this year.

Another worry are few investigations that car makers are often exposed to- battery fires and unexpected acceleration, to name a couple of them. To maintain its reputation high in the competitive sphere, it will be necessary for Tesla to keep these in check.

Bottomline

Tesla is due to announce its financial performance in the Q4 earnings. The Company remains confident and is ready to tackle risks. The China expansion and launching of two models this year, along with relaxation of subsidies will particularly be a huge opportunity this year for Tesla.


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