Tesla’s Recent Milestones Could Mark a Turning Point for Its Stock
Tesla Inc., the electric vehicle maker, has been breaking milestones left and right. Just today, shares in the company soared to an all-time high, surpassing a market capitalization of $700 billion. This comes on the heels of another milestone, when Tesla joined the S&P 500 Index on December 21st, 2020. With these recent milestones, some industry experts believe that Tesla’s stock is at a turning point and poised for explosive growth.
Tesla’s Recent Milestones
The company’s success has ignited the interest of investors, who have been attracted to Tesla’s vision of a future powered by electric cars. Over the past year, the company has achieved several significant milestones that suggest Tesla is more than just a flash in the pan.
Firstly, Tesla has been on a tear when it comes to sales. In the third quarter of 2020, the company reported record vehicle deliveries of 139,300 units, beating Wall Street’s expectations of 137,000 deliveries. This marks the fifth consecutive quarter in which Tesla has exceeded delivery expectations, a testament to the growing demand for electric vehicles.
Moreover, Tesla’s Model Y, which went into production in March 2020, has been selling like hotcakes. In the third quarter of 2020, the Model Y accounted for nearly 30% of Tesla’s total vehicle sales. The vehicle’s popularity is helping Tesla to gain share in the SUV market, which is the largest automotive segment in the world. According to data from Statista, SUVs and crossovers accounted for nearly 40% of global passenger car sales in 2019.
Secondly, Tesla’s gross margins have also been on an upward trajectory. In the third quarter of 2020, the company reported a gross margin of 23.5%, up from 18.7% in the same period last year. This is significant because it shows that Tesla is getting better at reducing the cost of producing its vehicles, which is essential for scaling the business and achieving profitability.
Finally, Tesla’s cash position has improved dramatically. At the end of the third quarter of 2020, the company had $14.5 billion in cash on hand, up from $5 billion at the end of 2019. This is critical because it gives Tesla the financial flexibility to invest in new products and technologies, as well as to weather any economic downturns.
Explaining the Surge in Tesla’s Stock Price
So, why has Tesla’s stock been on such a tear lately? There are several reasons.
Firstly, Tesla’s inclusion in the S&P 500 has been a significant factor in driving up the stock price. The S&P 500 is one of the most widely followed stock market indices in the world. Being included in the index means that Tesla will be included in the portfolios of many institutional investors, which may trigger more buying pressure.
Moreover, Tesla’s entry into the S&P 500 is a sign of the company’s growing maturity. The company has gone from a startup striving to disrupt the automotive industry to a well-established player in the market. This has boosted investors’ confidence in the company’s long-term prospects.
Secondly, Tesla’s recent milestones have helped to build a positive narrative around the company. Unlike many other automakers, Tesla is seen as a company that is leading the future of mobility. Its electric vehicles are a symbol of innovation and progress, and the company has a cult-like following among its customers and investors. This narrative has helped to create a sense of excitement and optimism around the company, which has translated into higher demand for its stock.
Finally, there is the matter of Tesla’s profitability. In October 2020, the company reported its fifth consecutive profitable quarter, a feat that has eluded many other electric vehicle makers. This has led many investors to believe that Tesla has the potential to become one of the most profitable companies in the world, which would justify its sky-high valuation.
What Could Happen Next?
Tesla’s recent milestones have put the company in an enviable position. The company has a growing customer base, improving margins, and a strong financial position. Moreover, the company has a pipeline of new products and technologies that could further accelerate growth.
However, the market also faces some significant challenges. There is fierce competition in the electric vehicle market, with established automakers like Volkswagen, General Motors, and Toyota all investing heavily in electric vehicle technology. Moreover, Tesla’s popularity with investors has led to a sky-high valuation that some believe is unsustainable.
The future of Tesla’s stock price depends on how the company navigates these challenges. If Tesla continues to execute well and deliver strong financial results, investors may be willing to overlook the competition and valuation concerns. However, if the company begins to stumble, either in the form of declining sales or persistent losses, investors may start to lose faith in the company’s long-term prospects.
Tesla’s recent milestones could mark a turning point for the company’s stock. The company has achieved several significant milestones that suggest it is well-positioned to take advantage of the growing demand for electric vehicles. Moreover, the company’s inclusion in the S&P 500 has given it greater visibility and credibility in the eyes of investors. However, the company still faces significant challenges in a competitive market, and its high valuation has left some investors wary. Ultimately, the company’s success will depend on its ability to continue executing and delivering strong financial results.