Electric car manufacturer’s shares Tesla (NASDAQ: TSLA) According to S&P Global Market Intelligence data, the 29.3% rise in June propelled the company’s share price above $ 1,000 per share for the first time.
Since the end of June, it has increased further, and is currently hovering around $ 1,400 per share. Over the past year, the shares of the novice automobile company have exploded by around 500%, obliterating S&P 500gain de 6,3%.
Tesla’s performance in 2020 represents a turnaround compared to 2018, when the share price went almost nowhere, and 2019, when its share price fell below $ 200 per share in May and spent most of the rest of the year coming out of the hole. In June, a constant stream of positive news helped fuel the builder’s rise:
- On June 8, the news announced that the Chinese version of Tesla’s Model 3 – which is made in Shanghai – had record sales in May. Sales not only more than tripled from April to 11,095, compared to 3,645, but also surpassed the record of 10,160 recorded in March. This caused a huge explosion in the company’s actions.
- Also on June 8, a new rival automaker Nikola (NASDAQ: NKLA) – who also bears the name of the inventor Nikola Tesla – announced that he would start taking reservations for his own electric van, the Badger, on June 29. Since Nikola has also focused on the semi-trailer market, the outperformance of its stock has increased interest in – and provided some validation for – the products offered by Tesla Semi and Cybertruck.
- Late on June 9, an internal Tesla email was leaked, in which CEO Elon Musk told employees that it was time to do everything and bring the Tesla Semi to volume production.
- Musk tweeted on June 21 that a seven-seat, three-row option for the Model Y crossover SUV would likely start production in 2020 instead of 2021. This encouraged investors, as it is a sign that the company is doing better work to speed up production, which should lead to higher growth.
- On the last day of the second quarter, Tesla’s stock surged as rumors abounded that it could post a fourth consecutive quarter of profitability. This would make it eligible – some even say a shoo-in – for inclusion in the S&P 500 index, which would trigger the purchase of interest from index funds and other institutional investors.
According to most traditional valuation metrics, Tesla’s stocks are incredibly overpriced at the moment. However, this hasn’t stopped its price from going up in the past, and it certainly won’t prevent it from going up in the future, as long as investors are optimistic about the company’s outlook. And indeed, Tesla’s future looks more secure now than it has ever been in the past.
Yet overvalued companies do not usually remain overvalued forever. Either a price correction occurs, or actions languish until reality catches up to the hype. Tesla’s shares could very well continue to rise in the short term. This does not necessarily make it a good long-term investment.