Tesla Blows Past Toyota To Become Most Valuable Automaker
Shares of electric vehicle maker Tesla (TSLA Stock Report) closed up 3.7% yesterday, to a market capitalization of $206 billion. This makes the EV maker the most valuable automaker company in the world, surpassing Toyota’s (TM Stock Report) market cap of $203 billion. This came after investors have been snapping up TSLA stock in anticipation of the company’s second-quarter results.
Tesla, of course, saw a “very strong” end to its second-quarter in vehicle deliveries, according to Wedbush analyst Daniel Ives. TSLA stock had a good rally this week after a leaked email said it could soon join the S&P 500. Besides, Electrek’s report of a leaked email from CEO Elon Musk to employees is fuelling a mini-rally in the company shares, pushing shares of the EV pioneer back above $1,000 to close at a record high.
Electrek reported that Musk wrote to employees: “Breaking even is looking super tight. Really makes a difference for every car you build and deliver. Please go all out to ensure victory!”
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China Sales: The Leading Indicator Of Tesla’s Recent Success
No doubt, China is critical to the future of Tesla and its quest to meet sky-high investor expectations about growth in vehicle sales. Tesla bought the land for its Shanghai gigafactory in 2018. After that, it quickly built the plant and won government certification. And the plant has been up and running since October 2019. For the past two years, Tesla had topped the list of the most popular electric vehicles sold in China. It is even beating homegrown EV maker Nio Inc. (NIO Stock Report) in terms of sales.
The key to Tesla’s success in China? Of course, the cars’ superior acceleration, horsepower, and torque are all important. But it is the price advantage that makes it more appealing to consumers. Thanks to China’s EV subsidy and benefits, the Model 3 is cheaper than comparable models, particularly in Shanghai and Beijing. However, now that it is gaining the much deserved spotlight, investors should also be aware that Tesla is vulnerable to a deterioration in relations between Beijing and Washington.
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Tesla Hits 10-Year Milestone, Where To Next?
By now, we should all know that Tesla is not just any other automaker. It is the technology behind the cars that brings it to where it is today. While most investors focus on Tesla’s rate of EV sales or production growth, there is a realization among some investors that its valuation could have more to do with its software expertise than its car making. The latest run in TSLA stock is being supported by an increased appreciation in Tesla’s potential to generate recurring software revenue from its platform. For instance, there has been a lot of talks about Tesla selling a self-driving software package as a subscription. And that comes from its advantage of capturing large amounts of real-time data from its vehicle fleet.
Tesla stock is up 170% year to date. The Tesla takeover of the car industry highlights investors’ shift to technology-focused automakers that develop electric-powered vehicles and self-driving software. The meteoric rise in TSLA stock also led investors to look for cheaper electric vehicle stocks to buy like Nikola Motors (NKLA Stock Report) and Workhorse (WKHS Stock Report). With all these in mind, should you buy or sell TSLA stock right now? If you decide to jump in right now, bear in mind there is likely going to be some volatility next week. And more potential upside may be underway judging from the content of the leaked email.