Tesla's Stocks Rise For No Reason

Tesla's Stocks Rise For No Reason

Tesla shares exceed $ 1,800 for the first time today. Tesla, an automaker that delivered 367,500 vehicles in 2019 and aims to exceed 500,000 marks by 2020, is worth more than the combined market values ​​of America's Big Three automakers (GM, Ford and Fiat Chrysler). Tesla is now worth three and a half times more than these companies combined. While Tesla plans to deliver more than half a million cars in 2020, Ford has 2019 sales of 2.41 million in the US. The same year, Fiat Chrysler sold 2.2 million cars in the US, while GM reached 2.89 million. And Tesla is many times above their total. There seems to be no fundamental reason why Tesla's shares rose by more than 11.2% today at $ 1,835.64. The situation here is the valuation momentum at the well-known electric vehicle company that started this spring and has accelerated since Tesla recently announced plans for a 5-to-1 share split. Like a tiny snowball taking an avalanche, change is surprising. Think about where Tesla was two years ago. CEO Elon Musk was considering buying Tesla exclusively for $ 420, tweeting that he "secured the finances". Stocks rose rapidly and suddenly and then fell. Tesla shares hit a 52-week low of $ 211 in August 2019. Since then, the stock has gained around 770%. This is an ongoing financial event that when a company's share price does something odd, the movement is based on the present value of its future cash flows. This is the case today, when Tesla stocks jump sharply without material news. According to YCharts data, for example on a price / sales basis, Tesla trades at about 13.7 times its revenue. GM? It has a 0.38x income multiple. Toyota is far more valuable than GM in terms of price / sales, managing 0.77x, or about double. However, this is a single digit percentage of the income floor set by Tesla. Tesla's is 34.6x, again based on YCharts data. Tesla could be ready to outdo its competitors, maintain the top spot in the electric car market, run the electric vehicle show for ten years. At least that's what today's stock price shows. If it falls below investor expectation, we can expect some retracement at some point.