There are high expectations once you have become the hottest stock of the year. Tesla Motors (NASDAQ:TSLA) has anchored the red-hot electric vehicle sector so far this year, as the industry has enjoyed near triple digit growth across the board. Even through a recession and a global pandemic, Tesla’s stock has returned nearly 250% so far this year and at current levels the stock has skyrocketed over 600% over the last 52 weeks. The quarterly earnings report released in late July saw Tesla post surprise profits for the fourth quarter in a row, despite closing one of its main production centers due to COVID-19. This all sounds great, but Tesla only sold just over 90,000 cars in the quarter, compared to an automaker like Toyota who sold 10 million cars in 2019. But Tesla supporters will be the first to tell you that Tesla is not a car company, it is a tech company, which is a neat argument except that nearly all of its revenue right now is measured by the sale of cars.
Any successful company will be polarizing, but Tesla seems to be able to stir the pot just a little bit more than other stocks. Nobody can doubt the cultural and global clout that the Tesla brand has. Elon Musk is a true pioneer in the world of electric vehicles and his vision for the future, which includes autonomous driving and digital driver data based insurance, is nothing short of amazing. But, that does not mean that Tesla is not currently overvalued. Today, Tesla’s market cap is astronomical, higher than a Space-X rocket launch. Tesla has surpassed Ford (NYSE:F), General Motors (NYSE:GM), and Toyota (NYSE:TM) as the world’s automaker. Not only that, but Tesla now has a larger market cap than Coca Cola (NYSE:KO), Disney (NYSE:DIS), Netflix (NASDAQ:NFLX), and Exxon Mobil (NYSE:XOM) to name a few. All of this took place within the last two quarters.
So what is next for Tesla? Their hold on the global electric vehicle market is quickly eroding. While they are still the industry standard, their market share will continue to diminish as more companies move into the field. Already this year Ford, BMW, Hyundai,Volkswagen, and Volvo have all either released electric cars or announced their entry into the electric vehicle market. That is a lot of competition. This does not include other industry rivals like China automaker Nio (NASDAQ:NIO), as well as competition for Tesla’s future semi-truck model from Nikola (NASDAQ:NKLA), Workhorse (NASDAQ:WKHS), and Tortoise (NASDAQ:SHLL).
Tesla did announce the construction of a new mega-production facility in Austin, Texas as well as plans for Tesla Insurance, which tracks the data of driver’s habits and behavior on the road to provide cheaper insurance based on driver performance. This September, Musk has also announced the much talked about “Battery Day”, which will unveil Tesla’s new battery technology that looks to seriously bulk up the range that Tesla vehicles can travel between charges. All of these are definitely things to look forward to for Tesla investors, and we know how quickly the stock can go on a run after some good news.
So is the stock overvalued? Probably. But one can argue that the whole stock market is overvalued right now. With the influx of retail investors on platforms such as Robinhood, Tesla has been the hottest stock to buy during quarantine. With an inevitable callup to the S&P 500, Tesla should receive an influx of capital from more shares being available, as well as the large amount of S&P index funds that will add Tesla stock to their portfolios. Tesla’s stock is definitely overvalued, but unfortunately, there also may be no better time to buy in as an investor than right now.
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