Wall Street’s darling: Tesla’s monumental roll

Tesla, the Electric Vehicle (EV) giant, had a monster week at the start of February. Shares of Tesla Inc. rose as much as 24% to $968.99 on Tuesday, 4 Feb, which valued the company at about $170 billion. The day before, on Monday 3 Feb, shares of the company had risen 20%. Over these two days, Tesla’s stock rose 40%. Shares surged 10% one day the week before that and 7% and 10% the week before that.

This resulted in the automotive behemoth gaining a market value greater than that of General Motors Co, Fiat Chrysler Automobiles NV, and Volkswagen AV combined, according to Bloomberg. No other stock on the Nasdaq 100 is up even a quarter as much in 2020.

Tesla stock has more than doubled this year

Tesla stock has more than doubled this year and shares have jumped 274% since July last year. Its market cap is rapidly approaching that of Toyota and is more than 5x that of Ford, Morgan Stanley analysts say. Tesla eclipsed Volkswagen’s market capitalization in January this year. Less than two weeks later, its $159.9 billion value at Monday’s close exceeded VW’s by more than $66 billion.

But, after an epic rally, Tesla shares tumbled 17% on Wednesday, 5 Feb, the most in eight years, cutting the CEO Elon Musk’s fortune by $5.9 billion. The stock had surged to a record close of $887.06 a day earlier on Tuesday, plunging suddenly in the last few minutes of trading, cutting share prices by more than $100 each, and bringing the stock’s one-day gain to 14%. Despite the 17 % drop, the company is still up around 76% year to date.

Traditional automakers have not fared as well during the same period, says CNBC. Ford is down more than 10% this year following a recent plunge in shares after disappointing earnings. General Motors is around 4% lower. Daimler and BMW are down about 11% and 9.5% respectively. Volkswagen’s Frankfurt-listed shares are around 1% lower for the year. Nissan is down around 7% this year and Honda is about 8% lower, as of Wednesday’s (5 Feb.) close in Tokyo. All of these companies are making a big push into electric vehicles.

Tesla’s amazing run might be fueled by CEO Musk delivering record revenue and his fourth quarterly profit in six periods. It could also be the opening of a key new factory in China; or it could simply be the fear of missing out felt by many investors. It might also be a combination of all the above, according to Bloomberg. Solid earnings from Japan’s Panasonic, which supplies Tesla with batteries, also provided a boost, according to Reuters.

Tesla’s dominance in the EV industry, led by its eccentric and committed CEO, has spearheaded a revolution in the market. With little to no competition in the years the company has operated, and with a long time to improve its formula, the automotive giant is a market leader and has a significant lead in an industry that traditional automakers under-invested in. The company dominates a market with the potential for huge growth in the coming future. The UK’s recent proposal to ban petrol and diesel vehicles by the next 15 years has added to significantly increased interest in the EV market. Tesla has a head start on all its competitors. The company leads in the budding U.S. EV market, and its Model 3 has risen to become one of the top-selling cars in Europe, electric and otherwise.

Tesla’s mad week has baffled Wall Street and left Tesla short sellers scrambling.

Global carmakers from VW to GM are pouring billions into electric vehicles, trying to capture some of Tesla’s stock-market magic while also meeting tighter emissions standards around the world. But the inferior battery range of recent EV entrants including Audi’s e-tron crossover and Porsche’s Taycan sports car show how far behind Tesla other automakers are, says Peter Rawlinson, CEO of Lucid Motors Inc. According to him, automakers like VW and GM are behind because they don’t put a high enough priority on developing EV technology in-house.

Tesla’s mad week has baffled Wall Street and left Tesla short sellers scrambling. Tesla short sellers have lost more than $8 billion on paper so far in 2020, according to S3 Partners, a financial analytics firm, and $2.5 billion more on Monday 3 February alone. The company’s stock is the most shorted in the United States. Tesla has also given a boost to the handful of other electric carmakers worldwide Chinese electric vehicle firms NIO and BYD both listed in the U.S., are up over 9% and 19% respectively so far in 2020.

Tesla shares, which traded below $200 as recently as June last year, took off in October 2019, when it posted a surprise third-quarter profit. Then it charged higher last month in January after reporting stronger-than-expected fourth quarter results and accelerating the timetable for the release of its new Model Y crossover SUV.