Tesla is having a sensational year with its’ progress on the Tesla factories and product enhancements. However, it is seeing astounding success in the stock market.
When Tesla first listed, it took a decade for the share price to reach $1000, and now recently, it took a few weeks to peak past $2000. Today, Tesla is the most valuable auto manufacturer globally with a market capitalization hitting almost $380 billion. That is more than the combined market value of Volkswagen and Toyota. If we take Toyota out the picture, then Tesla exceeds the market value of Ford, Fiat Chrysler, Ferrari, BMW, VW, Mazda, Nissan, Honda, Aston Martin, and Subaru combined.
Being the EV industry’s pioneer, Tesla keeps pushing the boundaries and smashing its way through obstacles, driving the share price to extraordinary heights.
Earlier this month, it was reported that Tesla is splitting its shares so they could be more affordable and accessible to small-scale investors. And that might need to happen again if it continues to see a price surge. Since the news broke of the stock split, Tesla’s shares climbed sharply by 50%, and it is now trading at nearly $2,100.
The stock split goes into effect on August 31 where current Tesla investors will receive five shares for each one they own. That will cut the price by a fifth bringing it to about $420 a share. Although it is expected that Tesla will generate an estimated $30 billion this year, Fiat Chrysler, General Motors, and Ford each forecast annual revenues of over $100 billion. Despite this, Tesla’s market value is now four times more than the combined market caps of these auto manufacturers.
So, is it wise for investors to keep plowing into the stock simple due to the fact that the split is imminent? Many of the Wall Street analysts are betting against Tesla. Currently, only three Tesla analysts have a price target above $2,000 with most having a consensus target of under $1,300. No doubt, Tesla fans can emphasize how analysts have been consistently inaccurate in their predictions.
The show does not stop there. Tesla could get another boost if it is finally added to the blue-chip S&P 500 index. It is a move that could probably happen soon considering that Tesla has posted a good run of quarterly profits. If this does happen and Tesla is in the S&P 500, it will then become the ninth-largest company in the index. On Friday, Tesla's market value surpassed that of Walmart's.
So, which companies are worth more than Tesla?
Some of the tech giants, of course. Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Google, Facebook (FB), Berkshire Hathaway (BRKB), Visa (V), and Johnson & Johnson (JNJ) are listed in the first eight of the S&P index.
But with so many short-sellers piling into Tesla, it has probably helped fuel the race. However, short-sellers will lose money as the price increases, and investors betting against Tesla are then forced to buy back the stock to cover their position in order to avoid further losses. This is what creates a phenomenon known as a short squeeze, which pushes the stock up more.
Tesla bull Ross Gerber, who is the co-founder and CEO of wealth management firm Gerber Kawasaki, and who happens to own Tesla shares, tweeted a warning on Thursday saying he thinks the stock is "being bid up potentially by people who think the split will make them money. Be careful." He added, "It's OK to take some off the table. I have," meaning he sold a few shares when they hit $2,000.
It is going to be a very interesting space to watch.
