Parts of the electric car manufacturer Tesla (NASDAQ: TSLA) In June, 29.3% rose, bringing the company’s share price above $ 1,000 per share for the first time ever, according to data from S&P Global Market Intelligence.
Since the end of June it has gone even further, and currently it is hovering around $ 1400 per share. In the past year, the shares of the first-class car company have blown up about 500%, which completely wiped out S&P 500is 6.3% profit.
Tesla’s performance in 2020 represents a spinning turnaround from 2018, when the share price basically went nowhere, and 2019, when the stock price fell below $ 200 per share in May and spent most of the rest of the year climbing out of the hole. In June, a steady stream of positive news helped propel the automaker’s rise:
- On June 8, news broke that the Chinese version of Tesla’s Model 3 – manufactured in Shanghai – saw record transfer in May. Sales not only tripled from April to 11,055, from 3,645, but they also surpassed Mars’ record of 10,160. It caused a big pop in the company’s stock.
- Also on June 8, recently public competing car manufacturers Nikola (NASDAQ: NKLA) – which is also named after inventor Nikola Tesla – announced that it would begin making reservations for its own electric pickup, Badger, on June 29. Given that Nikola has also focused on the semi-truck market, its portfolio transfer increased interest in – and provided some validation for – Tesla’s proposed Semi and Cyber Truck products.
- Late June 9, an internal Tesla email leaked, in which CEO Elon Musk told employees that “it’s time to go out and take Tesla Semi to volume production.”
- Musk tweeted on June 21 that a seven-seater, three-row option for the Model Y crossover SUV would probably start production in 2020 instead of 2021. This halted investors, as it is a sign that the company is doing a better job of speeding production, which should lead to higher growth.
- On the last day of the second quarter, Tesla’s share rose as rumors flooded that it may publish a fourth quarter as a result of profitability. That would make it justified – some even say a shoo-in – to be included in the S&P 500 index, which would trigger buying interest from index funds and other institutional investors.
Through most traditional valuation metrics, Tesla’s shares are incredibly exaggerated at present. However, it has not stopped its share price from rising in the past, and it certainly will not prevent it from rising in the future, as long as investors are bullish on the company’s outlook. And Tesla’s future actually looks more secure than it has ever done before.
Still, overvalued companies are usually not overvalued forever. Either a price correction comes with or the shares weaken until the reality reaches the hype. Tesla’s shares may well continue to rise in the short term. It does not necessarily make it a good long-term investment.