Tesla is officially in ludicrous mode — now Earth's 2nd most valuable carmaker
Seriously getting out of hand... Tesla. It's now the world's 2nd most valuable carmaker (behind Toyota), despite never having made an annual profit. The stock's almost quadrupled in value since October. It's almost boring to even bring it up anymore... But the rally also has half your coworkers beginning every meeting asking: when will it end?
- The Past Week: Tesla stock surged 54% — and it's added $56B to its value (that's almost 4 Lyfts)
- The Good: A string of feel-goods fueled some of the rally: rising sales/deliveries, a new factory in China, and its 2nd straight quarter of profitability. Oh, and Tesla's battery partner Panasonic also posted its first quarterly profit for its battery biz.
- The Reality: Tesla's value is double that of Ford and GM's combined, yet Ford and GM produced 39X as many cars as Tesla did last year (14M vs 367K). And they were hugely profitable last year, unlike Tesla.
Tesla is like a young avocado tree... Hot, in-demand on plenty of toast, and primed for growth. OG carmakers like GM and Ford are like mature orange trees. OJ used to be on every breakfast table, but now its demand is slowing. And investors care most about future profit/growth potential, and they're not convinced it's there for the Detroit-based orange growers.
The rally could also be an effect of FOMO hype... Investors hopping on the soaring Tesla bandwagon drive the stock higher, rinse, repeat. It could also partly be a "short squeeze." When you invest "long," you hope to buy low and eventually sell higher. "Short" sellers are the opposite — they're betting a stock will go down.
- Given all the people Doubting Elon's Vibe, Tesla is aggressively shorted — many investors hope the stock falls. They "borrow" and then sell it, hoping that when it's time to give the stock back to their broker, they can buy it at a lower price and turn a profit.
- When TSLA shares rise, that puts pressure on short-sellers to buy shares back sooner (because the more it rises, the more they lose).
- Those buy-backs to close out shorts can help drive Tesla's stock higher... which then squeezed even more short-sellers to buy back the stock and cut their losses.