With stock surging, Tesla under pressure to deliver
SAN FRANCISCO — For months, Tesla stock’s been on a bull run. Now, it’s a stampede. On Monday, investors sent the electric car maker’s market value into entirely new territory, briefly ripping past General Motors in market value, putting Tesla in first place among U.S. automakers.
It also raises the stakes for the company as it prepares to begin assembling its highly anticipated mass-market electric sedan, the Model 3, which is scheduled for release this summer or fall, or perhaps later. The propulsive rise in the company’s stock — up more than 70 percent since December — amps up the pressure on Tesla and its visionary chief executive, Elon Musk, to deliver near-flawless performance.
Tesla stock closed up 3.26 percent at $312.39; GM shares also ticked up slightly to end the day at $33.97. Both companies’ valuation hovered around $51 billion.
Surpassing GM and Ford in market value, justified by financial fundamentals or not, signals a revolution in the global automobile industry as cars and trucks subsume ever more Silicon Valley-style technology and, essentially, evolve into the robots of the roadways.
“We’re in a new era of the automobile industry,” said Efraim Levy, an analyst with S&P Global Market Intelligence. That shift is not just to self-driving cars, but to electric power and away from gasoline, he said.
Tesla’s stock run-up also demonstrates Musk’s magnetic power, he said: “People are definitely enamored with Elon Musk and Tesla.”
Still, Levy and many other analysts see Tesla’s stock price as overvalued given cash flow projections even under Musk’s rosiest scenarios for the Model 3.
Plenty of short-sellers — investors who bet a high-flying stock is due for a crash — agree. About 20 percent of Tesla’s shares are held by investors betting against the company.
Some analysts are even saying forget the financial underpinnings, for now.
Rational arguments “won’t matter” for Tesla’s stock price, at least for a while, Piper Jaffray analyst Alex Potter said in a note to investors, raising the firm’s target price to $368 a share.
Yes, the company is burning through cash and sets unrealistic production deadlines, he said, but “because of its superior products, loyal shareholders, and inspiring mission, (Tesla) remains unscathed.”
In other words, it’s a momentum stock right now, rising in part because it’s climbing and new investors don’t want to miss out. Investors can make big bucks on momentum stocks, if they sell before the peak is reached, or, if the company defies the naysayers and becomes a wild success.