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The growth and rally behind Tesla stock take its backing from the perception of the company by its investors and not necessarily on its auto sales.
Electric vehicle manufacturer Tesla Inc (NASDAQ: TSLA) has made headlines again as its stock closed with a 4.89% rise on Monday. Following the recent gains, Tesla market capitalization has now surged by about $500 billion in 2020, a figure that now makes it more valuable than the top 9 largest auto manufacturing companies combined.
According to a report by CNBC, the nine largest automobile companies that Tesla is now more valuable than includes General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F), Toyota Motor Corp (TYO: 7203), Volkswagen Group (ETR: VOW3), Nissan Motor Co Ltd (TYO: 7201), Hyundai Motor Co (KRX: 005380), Fiat Chrysler Automobiles N.V. (NYSE: FCAU) and Peugeot SA (EPA: UG). The companies meteoric rise became more evident in 2020 despite the COVID-19 pandemic that stiffened supply chains of automobiles produced in the second quarter and a better part of the third quarters respectively.
The current Tesla valuation comes despite the company delivering just a fraction of the total car supplies both in the United States and around the world. According to a Cox Automotive forecast, the total car sales in America is about 14.3 million this year, down from the 17 million recorded, and with Tesla’s projection to deliver a record vehicle of 500,000 globally, the automaker supplies less than 1% of the global car sales. Then experts asked, what is the reason behind the massive valuation rally.
Coinspeaker reported earlier that the prospects of Tesla have brought in a differing rating from both Morgan Stanley (NYSE: MS) and JPMorgan Chase & Co (NYSE: JPM) analysts with the former backing the stock with a buy rating and a price target of $540 while the latter has a sell rating with a price target of $90. According to the JPMorgan Chase analyst, Ryan Brinkman, Tesla has no basis to have a valuation that exceeds those of more traditional auto brands such as Toyota and Volkswagen who both sold 22 million units thus far this year.
Tesla Stock Soars Based on Auto Industry Investors Sentiments
The growth and rally behind Tesla stock take its backing from the perception of the company by its investors and not necessarily on its auto sales either per quarter or per annum. Tesla’s product ideals are transgenerational and the electric vehicle model focuses much more on sustainability in the longer term.
For a company that made its public listing debut back in 2010, the company just recorded its five quarters streak of profitability after about 10 years of aiming at such stability, a move that has earned it a place on the S&P 500 Index. The investors perhaps have faith in the longer-term prospects of the company as the world will still embrace electric vehicle car models in a bid to combat climate change. The current dividends being enjoyed thus may be a reward for the unrelenting backing of the company’s ideals.
Tesla also has other products such as the self-drive software and plans to supply batteries for other auto brands, a few of its projected ventures that are tipping investors to go more bullish on the stock.