Thanks to Tesla’s increased inventory, Elon Musk is now the seventh-richest person in the world. Paul Hennessy / SOPA Images / LightRocket via Getty Images
Tesla’s wild stock surge is confusing common sense. Since crossing the $ 1,000 mark on June 10, the electric car maker’s stock price has skyrocketed another 70 percent in just one month, making it not just the most valuable automaker in the world. (despite selling significantly fewer cars than its similarly-valued competitors), but also Tenth-largest stock in the United States, behind tech giants like Apple, Amazon, and Google.
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On Friday, Tesla CEO Elon Musk’s net worth officially topped Warren Buffett’s, according to the Bloomberg Billionaires Index. And it is still on the rise. On Monday, Tesla shares jumped 13 percent to a new record of $ 1,773, trading at more than double its average Wall Street price ($ 805) and three times higher than it was in early 2020.
Why do Tesla’s shares keep increasing?
New production plans, solid delivery numbers, analyst updates, and conversations about Tesla’s inclusion in the S&P 500 index have helped boost its stocks through the roof.
Last week, Tesla shares saw a strong two-day rebound after the company reported better-than-expected delivery figures for the second quarter, defying analysts’ concern that the coronavirus pandemic could have affected sales. of electric vehicles. And as stocks continue to rise and Tesla approaches the date to report second-quarter earnings, there have been talks that the company may be the latest addition to the S&P 500 index.
To be included in the S&P 500, companies must make an accounting profit for more than four quarters in a row. Tesla has reported three consecutive profitable quarters. We will know if the company has met the final requirement when it reports earnings on July 22.
What do the experts say?
Some analysts have warned that instead of the stock boom fueling Tesla’s prospect of being included in the S&P 500, it is anticipation of joining the S&P 500 that has fueled the stock surge.
“When buying Tesla [stock] now top candidates are forcing the S&P indices to give stocks a growing weight, “Larry McDonald, editor of The Bear Trap Report, he wrote in a recent note. Therefore, ETFs / Indices will be forced to pay, buying even more shares. Then the hot money comes out, leaving indexes to hold the bag.
Morgan Stanley transportation analyst Adam Jonas, one of the biggest voices on the market at Tesla, is also skeptical about the long-term promise of the stock. When Tesla approved $ 1,000 last month, Jonas warned investors that Tesla needs to deliver at least four million cars to justify the price. (Tesla plans to deliver half a million units in 2020.)
“One should also keep in mind that many of Tesla’s business objectives face a degree of execution risk that may be significantly higher than many of the more proven / mature companies in this analysis,” said Morgan Stanley in a note on 24 May. June.
“The days of Tesla’s virtually undisputed dominance may be numbered,” Jonas said in a note Friday. It has an underweight Tesla stock rating and a price target of $ 740.
