Within minutes of the stock market’s open on Tuesday, shares of Tesla shot up 17%. Which feels extraordinary, except for the fact that they gained more the previous day — 20% — and also surged 10% one day last week and 7% and 10% the week before that.
By the time the market closed, the stock had gained 112% this year, giving the electric vehicle maker a market value greater than that of General Motors, Fiat Chrysler Automobiles and Volkswagen combined. There is, not surprisingly, plenty of wonder and awe on Wall Street about the rally — no other stock on the Nasdaq 100 is even up a quarter as much in 2020 — but few concrete explanations as to what’s driving it.
Theories abound, including many of the tried and true — it’s the result of CEO Elon Musk delivering record revenue and his fourth quarterly profit in six periods; or it’s a short squeeze; or it’s the opening of a key new factory in China; or it’s an extreme case of Fomo sweeping across the investor community. Or it’s a combination of all of the above.
There is another school of thought emerging, though, that likely also helps explain the magnitude of the rally. The gist is that the long-held assumption that legacy automakers will catch up to Tesla in the electric vehicle market is wrong. In fact, Musk may be adding to his lead, ensuring in the process that the company dominates one of the true growth markets in the world for years to come.
“There’s a recognition that Tesla is in a pre-eminent position in terms of EV technology,” Peter Rawlinson, CEO of Lucid Motors, said in an interview Monday at the BloombergNEF Summit in San Francisco. “They’re even further ahead than has been reported, and I think the gap is widening, not closing.”
Tesla rose as much as 24% to $968.99 on Tuesday before plunging suddenly in the last few minutes of trading, trimming share prices by more than $100 each, and bringing the stock’s one-day gain to 14%. Rawlinson’s praise echoed comments made recently by the CEO of Volkswagen, the world’s top-selling automaker. Tesla eclipsed the German manufacturing giant by market capitalisation on 22 January. Not even two weeks later, its $159.9-billion value at Monday’s close exceeded VW’s by more than $66-billion.
Cars will “become the most important mobile device,” VW’s Herbert Diess told top executives at an internal meeting last month. “If we see that, then we also understand why Tesla is so valuable from the view of analysts,” he added, lamenting that VW isn’t also looked at as tech-like. — Reported by Gabrielle Coppola and Ed Ludlow, (c) 2020 Bloomberg LP