Tesla increases market valuation by $ 14 billion a day
- 7th July 2020
- Posted by: Hakeem
- Category: INVESTMENT, Stock
(Bloomberg) – Remember when Tesla Inc.’s market valuation outperformed General Motors Co.? That was only in October, though investors can’t be blamed for thinking it was an eternity ago.
The electric vehicle maker’s valuation increased the combined value of the Big Three – GM, Ford Motor Co. and Fiat Chrysler – in just five business days through Monday. Tesla has increased its valuation by an average of $ 14 billion each of those days.
Tesla shares have seen a strong rebound this year, recovering spectacularly from a pandemic-related selloff, recently helped by second-quarter delivery numbers that beat market estimates. Last week, the company earned roughly the net worth of Fiat Chrysler Automobiles every day.
While skeptics have said that the current pace of action may be detaching from reality and being driven by “power of narrative ”.
“There is definitely a significant retail component that is driving stocks higher,” Wedbush Securities analyst Daniel Ives said in an interview, referring to individual investors operating on platforms like Robinhood.
Still, many large institutional investors now also want a piece of Tesla and the electric vehicle market, he said. “In a covid-19 pandemic and a dark macro environment, the company just released 90,000 deliveries, especially when other automakers are facing Herculean challenges.”
Tesla said on July 2 that He delivered 90,650 cars in the second quarter, compared to the average analyst estimate of approximately 83,000 units.
Big-capital interest in buying Tesla shares was also mentioned by Craig Irwin of Roth Capital Partners, who said the company’s valuation was fueled by fund managers who have bundled Tesla with Netflix Inc., Amazon.com Inc ., Facebook Inc. and the like, and were pricing it as a large-cap growth stock.
“Those managers don’t understand that this is not an industry where the winner takes it all, as are those other companies,” said Irwin, noting that 180 more electric cars will go out by 2025.
Tesla shares have gained at least 5% in four of the five sessions through Monday. While it may not be unusual for a company that has made 20% profit on a day twice in its history, the increase shows consistency not seen before. It is the first time that the action has recorded four out of five sessions with increases of such magnitude.
The latest rebound brought this year’s Tesla rise to $ 170 billion, an amount that exceeds the market capitalization of all but 30 companies in the S&P 500.
“Tesla’s valuation makes no sense under any traditional measure,” said Ivan Feinseth of Tigress Financial Partners. However, “it is not a traditional company, so how do you measure it traditionally?”