A Look at the Timeline
Tesla’s current performance represents a turning point from 2018, when the stock price was virtually null, and from 2019 when the stock price fell below $200 in May. In June, the carmaker’s shares increased through a steady stream of positive news:
On June 8, Tesla's Chinese version of the Model 3, manufactured in Shanghai, saw record sales in May. Not only did vehicle sales jump to 11,095, but it beat the previous record of 10,160 vehicles sold in March. That brought a great pop into the stock of the company.
Nikola, a rival manufacturer also named after inventor Nikola Tesla, announced on June 8 that they would start to take reservations for their electrical pick up truck on June 29. Given that Nikola has also focused on the semi-truck market, its inventory's output has raised interest in the Semi and Cybertruck products proposed by Tesla.
Late on June 9, an internal email was leaked from Tesla, in which CEO Elon Musk told staff that "it is time to go all out and bring Tesla Semi into production volume."
On June 21, Musk tweeted that the seven-seater, three-row Model Y SUV crossover option is expected to start production in 2020 rather than 2021. It has attracted investors, as this is a sign that the business accelerates production better and is expected to lead to further growth.
On the last day of the second quarter, Tesla’s stock grew as rumors were abundant that the fourth quarter of profitability could be posted. This would allow for inclusion in the S&P 500 index, which will trigger the purchase of interest from index funds and other institutional investors.
What Happens Now?
By most traditional valuation measures, Tesla's stock is currently overpriced. However, this has not stopped its share price from rising in the past, nor will it prevent it in the future, so long as its prospects are flat among investors. In reality, Tesla's future now looks more certain than ever before.
However, overvalued businesses do not typically remain overvalued indefinitely. Either there is a price correction or shares languish until the hype is achieved by reality. In the short term, Tesla's shares can keep on rising. This isn't necessarily a good investment for a long time.
Why Tesla's Stock Soared
Tesla Electric Car Manufacturing shares rose dramatically on July 2 and increased to over $1,200 for the first time. Shares grew more than 9% shortly following the opening of the market.
Despite the Tesla main plant’s shutdown during the first half of the quarter in Fremont, California, investors encouraged secure Q2 vehicle deliveries that came well ahead of analysts' estimates.
In the second quarter of July, Tesla delivered about 90,650 cars and smashed the consensus estimate of analysts for 72,000 deliveries. "We have effectively brought production back to previous levels though our key plants in Fremont have been shut down for a significant part of the quarter," said Tesla.
Of the 90,650 deliveries, 10,600 were Model S or X and Model 3 or Y, according to the company. Total shipments in the second quarter compared to 88,496 for the first quarter of the year 2020 and 95,356 for the year. The big jump in growth on Thursday has recently gone up to its torrid run.
In the last 12 months, shareholdings are up 435% and 190%, as investors show a growing appreciation of the accelerated pace of execution of the company as it takes advantage of the enormous growth opportunity ahead of them.
Shortly, it is expected that investors will expect sharp delivery growth in the second half of the year, driven by Tesla 's new Y-model and its factory in China, which only started to produce vehicles by the end of the year 2019.
About the Author
Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.