This year, Tesla’s position in the financial market brings nothing but amazement. Coronavirus caused an explainable sharp drop in the consumer demand for vehicles.
The turbulence in this traditionally strong branch of the American economy couldn’t help but worry all Forex community. Fluctuations in supply and demand zones have always been natural for the Forex exchange.
However, some brokers have faced serious problems due to the recent worldwide events and unstable nature of the leading currencies. Some traders even claimed intentions of shifting to cent account Forex brokers. However, there’s no need to panic, and here’s why.
The vast majority of car manufacturers in the country are struggling to make ends meet. Still, amid this devaluing trend, this famous electric car company is likely to triple the value of its shares this year.
Let’s go back a year ago. California-based electric carmaker Palo Alto made about forty million back then. Tesla’s stock price of $ 235 contributed to this. As of Thursday, this share is already worth more than a thousand, 1,208 dollars, to be precise.
With a current market cap of U.S. $ 224 billion, Tesla has taken a leading position in its niche, beating Japan’s Toyota Corporation.
Due to the pandemic the Tesla’s Californian plant was closed almost the entire spring, but it did not become a disaster for the company.
On the contrary, in his letter to the staff, Elon Musk supposed that this period would break even. Tesla is now able to sell cars at a price excessing the assembly costs.
On Thursday, the company’ quarterly sales data became public. They immediately gave a powerful impetus to the growth of Tesla shares.
This is not surprising given the fact that the number of deliveries of electric vehicles to customers amounted to more than 90 thousand. The preliminary average estimate of experts, meanwhile, was about eighty-three thousand.
The news triggered a company stock growth of more than nine percent on the cusp of the holiday weekend. To date, Tesla’s stocks are trading at an incredible price, exceeding the analytics’ estimation by more than three hundred times.
No one in the automobile industry, except Musk, has received such favorable assumptions either now or in the near past.
Just a year ago, we could not call the situation with Tesla otherwise than the crisis. Their retail strategy was not credible, despite rising bond yields. In 2019 the automaker had only 2.2 billion dollars.
Now they have as many as eight at their disposal. Let’s try to find out what contributed to such a powerful leap forward.
Gaining the lead in EV Market
The investor community has realized that, due to Tesla’s dominant role in the electric car market, competitors are unlikely to affront them. That was one of the main factors contributing to the rapid turnover of the company’s shares.
Also, Tesla creates more powerful batteries (plus, at a lower cost) and it helps to win positions. The company puts a lot of effort into maintaining this engineering advantage.
Their cars operate on high-tech cylindrical battery cells. In addition, they also pay careful attention to software that controls the battery of their electric vehicle.
Recent impressive stock growth is justified, says professional analyst Dan Ives. In the next year or a year and a half, we can expect the accelerated sales of electric vehicles.
This, to a considerable degree, can become a reality thanks to the Giga 3 Battery Plant and its innovations. So $ 1,250 per share is a reasonable price.
Also, Wedbush Securities analyst considers the supply volume of 90 thousand per quarter an amazing thing, especially during the pandemic. It is logical that people consider such quantity the pivotal moment for establishing a stable growth trend.
After analyzing the industry data, Ives thinks China is the main guarantee of spring success. The country’s demand for Model 3 was the light at the end of the tunnel for the company.
Still, Tesla’s assessment is hard to explain even in spite of all these factors and the first line in the rating of electric car manufacturers. On average, analysts rate the company forty percent below their current level.
Even Musk himself considers the share price to be too high. Despite the break-even value, the number of deliveries in the second quarter of this year is lower than in the previous one (90 thousand now against 95 thousand in 2019).
Tesla’s record-breaking sales of regulatory loans helped them make a sixteen-million profit in the first quarter. The total sum amounted to more than three hundred and fifty million dollars.
895 million—the company declared these figures as a quarterly negative cash flow. The January statement that they can effortlessly exceed half a million deliveries failed to confirm.
What about the lowest point of the curve?
Taking into account all the mentioned above, reducing Tesla shares this year is unlikely the right decision. At the moment, according to investors, the assessment of the shares is absolutely adequate.
If you have a stake in the company, it is better not to risk it. Moreover, it’s worth remembering that over the previous two years, the company had experienced serious ups and downs. And each time the shares lost almost half of their value.