Elon Musk’s electric vehicle company is one step closer to a $ 1 trillion market valuation.
Tesla Inc. shares rose to a record high on Friday, bringing the electric vehicle maker another step closer to joining an elite group of companies with market valuations of at least $ 1 trillion.
The stock rose as much as 1.8% to hit a high of $ 910 before closing at $ 909.68 in New York. This drove the Elon Musk-led automaker to briefly overtake Facebook Inc.’s rating.
The pioneering electric vehicle maker is up 29% this year, ahead of the S&P 500 index rising 21%. Meanwhile, Facebook suffered a major blow on Friday after a cautious outlook from Snapchat parent Snap Inc. weighed on the shares of ad-dependent tech companies. Facebook lost up to 6.1%.
After some sharp swings in the first half of this year, Tesla shares have risen steadily since early June, aided by two strong quarterly results that showed the company is faring much better than traditional automakers on addressing the semiconductor shortage. In particular, third-quarter shipments and margins dwarfed all estimates, while margins for the period impressed bulls and bears on Wall Street alike.
“Although Tesla was certainly affected by the semi-scarcity, we see several reasons that explain why Tesla volumes were less affected by the semi-scarcity than other automakers,” wrote Credit Suisse analyst Dan Levy on October 15 in a note. Levy explained this since Tesla writes much of its own firmware, it is better able to quickly switch to chip supply when needed.
Tesla makes two of the best-selling electric cars in the world – the Model 3 and Model Y – despite great pressure from legacy automakers to develop competitors and the emergence of several new players. As the adoption of electric vehicles continues to grow, with strong support from policy makers, Tesla is expected to be a big beneficiary. And investors rely on it.
“The latest results absolutely do not justify Tesla’s current valuation, but that was never the bullish thesis,” said Matt Weller, global head of market research at Forex.com. Traders bought the stock with the expectation that the company will capture a dominant portion of the fast-growing electric vehicle and self-driving car markets in the coming years, he said.
“These results show that Elon Musk and his company have built a profitable automaker that gives them more runway to reach their ultimate goal and grow into the sky-high valuation of the market,” added Weller.
