What happened
Electric car maker shares Tesla (NASDAQ: TSLA) It shot up 29.3% in June, driving the company’s stock price above $ 1,000 a share for the first time, according to data from S&P Global Market Intelligence.
Since the end of June, it has increased further, and is currently hovering around $ 1,400 a share. Over the past year, the shares of the upstart automaker have increased approximately 500%, absolutely destroying the S&P 500‘s 6.3% profit.
Image source: Getty Images.
And that
Tesla’s performance in 2020 represents a radical turnaround from 2018, when the stock price basically went nowhere, and 2019, when its stock price plummeted below $ 200 a share in May and passed the highest part of the rest of the year coming out of the hole. In June, a steady stream of positive news helped fuel the automaker’s rise:
- On June 8, it became known that the Chinese version of the Tesla Model 3, which is manufactured in Shanghai, posted record sales in May. Sales not only tripled from April to 11,095, from 3,645, but also broke March’s record of 10,160. That caused a huge explosion in the company’s shares.
- Also on June 8, the new public rival automaker Nikola (NASDAQ: NKLA) , which is also named after inventor Nikola Tesla, announced that it would begin making reservations for its own electric van, the Badger, on June 29. Considering that Nikola has also focused on the semi-trailer market, the performance of its shares increased interest in – and provided some validation for – the Semi and Cybertruck products proposed by Tesla.
- At the end of June 9, an internal Tesla email was leaked, in which CEO Elon Musk told employees that “it’s time to do everything possible and bring the Tesla Semi into volume production.”
- Musk tweeted on June 21 that a seven-seat, three-row option for the Model Y crossover SUV would likely start production in 2020 instead of 2021. This encouraged investors as it is a sign that the company is making a Better job to speed up production. , which should lead to further growth.
- On the last day of the second quarter, Tesla shares rose as rumors abounded that it could post a fourth consecutive quarter of profitability. That would make him eligible, some even say it’s a shoo-in, for inclusion in the S&P 500 index, triggering the purchase of interest from index funds and other institutional investors.
Now what
Based on more traditional valuation metrics, Tesla stocks are incredibly expensive right now. However, that has not stopped its share price from rising in the past, and it certainly will not prevent it from rising in the future, provided investors are optimistic about the company’s prospects. And, in fact, Tesla’s future looks more secure now than at any time in the past.
Still, overvalued companies are not usually overvalued forever. Either a price correction appears or stocks languish until reality catches up with the hype. Tesla shares could continue to increase in the short term. That doesn’t necessarily make it a good long-term investment.
