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Back when Tesla Inc delivered 95,000 cars to customers during the spring quarter of 2019, the stock price was languishing at about $235 and Elon Musk’s electric car company was valued at “only†$40 billion. Fast forward a year and the shares are now priced at more than $1,200. With a market capitalisation of $224 billion, Tesla has surpassed Toyota Motor Corp as the world’s most valuable automaker.
Yet in the second quarter of 2020, Tesla delivered 91,000 vehicles — about 5% fewer than the same period last year. That’s pretty underwhelming for a company whose fans view it as a fast-growing technology company in the mold of Amazon.com, rather than a sluggish metal-bashing carmaker.
So how is the massive recent jump in its market value justified?
In fairness, it shows resilience to sell this many cars when the company’s main California plant was shut by the pandemic for much of the spring period.
Doubtless, Tesla’s new Shanghai plant picked up the production slack, which suggests the expense and effort of getting that China factory up and running was worth it. The launch of Tesla’s new Model Y crossover vehicle will have helped. Ford Motor Co and General Motors Co both saw their US deliveries decline by a third in the same quarter.
Nevertheless, Tesla’s stock market acolytes pushed the shares up another 8% this week, adding $16.5 billion to the market value.
Such exuberance is hard to understand. Musk’s company sold 7,650 more vehicles than analysts expected during the second quarter, and the stock price jump equates to about $2 million of added shareholder value for each of those additional sales. This seems a little excessive given that a Tesla Model 3 sells for less than $40,000, and the profit margin on those cars is pretty slim.
—Bloomberg