It could be a race to the finish – or at least the closing bell on Monday trading.
With Tesla’s stock price up as much as $10 a share during the New York Stock Exchange’s morning session, the automaker briefly surged ahead of rival General Motors to become the country’s most valuable carmaker based on market capitalization.
With GM also in positive territory, however, it remains to be seen whether the upstart or the established automaker will wear the crown at the end of the day. Tesla has been in striking distance since last week when it surged past Ford Motor Co. to become the number two maker by value.
The surge in Tesla’s market performance comes at a critical time for the Silicon Valley automaker, which little more than a month ago had warned its finances were “on the edge” as it continued its costly investment in the launch of the new Model 3. The midsize electric vehicle, Tesla’s first priced by the mainstream, is set to go into production in July.
(Tesla poised to become America’s most valuable automaker. To see why, Click Here.)
At a midday price of around $312 a share – up nearly $10 since Friday’s close – Tesla shares are now going for nearly 10 times the nearly $34 GM stock is commanding. That has led to an almost giddy euphoria on the market, the bulls wondering how high is up, the bears worrying that it’s only a matter of time until gravity comes into play.
“It’s one of the strangest things I have ever seen,” said analyst David Sullivan, of AutoPacific Inc., “Wall Street being patient and rewarding a company that keeps losing money, quarter after quarter.”
Indeed, the market had seemingly turned against Tesla when, in late February, it reported that it lost $121.3 million, or 78 cents a share, during the final quarter of 2016 – the automaker falling into the red during all but two quarters since it went public.
Tesla stock was trading under $250 in the wake of that Q1 report and a number of observers had turned sour, Goldman Sachs analyst David Tamberrino downgrading the maker’s stock from “neutral” to “sell.”
As recently as last week, CFRA’s Efraim Levy continued to warn investors away, insisting “TSLA’s rich valuation concerns us.”
For his part, Musk gave skeptics the razz in a tweet when Tesla topped Ford. Pointing to those who were betting on a slump, he wrote, “Stormy weather in Shortville.”
(Click Here for details about Tesla’s Q1 production record.)
Tesla did get a boost when it reported earlier this month that first quarter sales and production both reached record levels, though it still lags behind any of the traditional manufacturers. GM sold about 10 million vehicles last year, which works out to about 250% more vehicles each week than the 76,000 Models S and X battery vehicles Tesla moved in all 2016.
Of course, the real focus for investors is what happens once the Model 3 goes to market. CEO Musk has forecast sales will climb to 500,000 in 2018 – most of that from the small electric vehicle – and that it will grow to 1 million by 2020.
He has also announced plans for other new products, notably the Model Y, a compact crossover-utility vehicle based on the same architecture as the Model 3.
Of course, the challenge will be to deliver on plan. Tesla has yet to launch any product on schedule, the Model X running two years behind and then suffering serious quality problems that led influential Consumer Reports to warn potential buyers to beware.
While Tesla might not hold onto its valuation crown today, more and more observers and investors seem to be betting it will get there, likely sooner than later.
Analyst Alexander Potter, of Piper Jaffray, on Monday issued a note to investors suggesting that Tesla is having a “captivating impact on consumers and shareholders alike. He upgraded his own advisory from “neutral” to “overweight,” raising his target for TSLA shares to $368 from $223.
(Tesla’s market value surpasses Ford’s. Click Here for the story.)
It seems that gravity might not yet be gaining a grip on Tesla.
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