Tesla’s record sales give wings to stock performance

Tesla’s stock performance has been mirroring the sales trajectory but as analysts raise a concern about stretched valuations, here’s looking at how EV maker is getting set for the next leg.

By Sumana Sarkar

13 Jan 2021

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Tesla's Gigafactory in Shanghai is already up and running and the Gigafactory Berlin and Gigafactory Texas remain on track to start deliveries from each location in 2021.

Tesla stock rallied 695 percent in 2020. On a one-year basis, the rise in stock price is even higher at over 700 percent.

The Tesla stock's surging performance has made its founder Elon Musk the richest man on the planet.

While 2020 for most businesses have been a rather forgettable year, one firm sure had a dream run and it seems to be getting better. Yes, it’s Tesla’s stupendous performance both on highways and Wall Street.

The Tesla stock has catapulted a jaw-dropping 695 percent in 2020 and sales recorded robust 60 percent-plus growth on a year-on-year basis. The company produced 509,737 cars in 2020 and managed to deliver a record 499,550 units, just a tad short of its 500,000 target. On the basis of market cap, it is now more valuable than even Toyota.

In fact, it is interesting to see the correlation between Tesla’s sales and stock performance. The EV maker’s deliveries in the fourth quarter of 2020 were close to 180,600 units, almost 30 percent jump sequentially, compared to the third quarter. The company delivered just short of 320,000 units in the last 6 months of 2020, almost 140,000 units more than the units delivered in the first 6 months of the year.

In the same period, the stock shot up from $107 (Rs 7,919) per share levels in January, 2020 to over $700 (Rs 51,801) per share on December 31, 2020 and almost near the $900 per share mark at $880 (Rs 65,128) in the first week of January, 2021. Just in the past three months the stock price jumped over 90 percent and the 52-week change in the stock price is 654 percent compared to S&P500 (one of the leading stock exchanges in US and global benchmark) clocking a 15.75 percent rise.

Making Musk the richest man on earth
The Tesla stock's surging performance has, not surprisingly, made its founder Elon Musk the richest man on the planet. On January 1, 2021, he zipped past Amazon.com Inc founder Jeff Bezos, Microsoft’s Bill Gates and the Oracle of Omaha, Warren Buffet. With the whopping 670 percent rally in the Tesla stock in 2020, Musk’s net worth had catapulted to 128 billion dollars (Rs 947,328 crore).

Is the growth real?
But the question is what’s propelling this stupendous ride for the company. Many stock analysts are raising concerns about stretched valuations of almost 24 times sales. The forecast for the 2021 price-to-earnings ratio is over 300. Most of the Tesla run is based on the expected pace of its expansion and sales globally. Could the company reach 1 million vehicle deliveries by end of 2021?

The Gigafactory in Shanghai is already up and running and the Gigafactory Berlin and Gigafactory Texas remain on track to start deliveries from each location in 2021. Tesla Semi deliveries will also begin in 2021. But at the same time other automobile biggies like Volkswagen are targeting 1.5 million EVs annually by 2023. There are others like Toyota, Nissan, Mercedes, BMW and General Motors in the fray too. Several other EV operators from China like Nio are also ramping up capacity. Analysts are looking at how the Model Y pricing will impact EV sales in China, arguably one of the world’s biggest EV sales hub.

Perhaps competition, scale and innovation would be the buzz words that will define the Tesla story going forward as the world embraces electric mobility with greater gusto. And, Tesla has just marked its footprint in India.