Tesla’s stock market rally, which lasted an impressive 13 days, finally came to a halt on Wednesday, a Reuters report said.
During this historic winning streak, the US automaker’s shares soared to new heights and added over $200 billion. While the rally significantly boosted the company’s worth, it also ignited discussions about its stratospheric valuation and comparisons to other automakers.
Tesla’s electrifying rally captivated investors and analysts alike as the company’s shares experienced an extraordinary surge, skyrocketing by more than 40 percent. This surge resulted in a staggering $240 billion increase in its market capitalization, surpassing the entire value of Toyota, the second-most valuable automaker globally. With a market value of approximately $814 billion, Tesla’s stock price far exceeded the predictions of Wall Street analysts, who had projected a median target of $200, as per Refinitiv data cited by Reuters.
One key catalyst behind Tesla’s unprecedented rally was the announcement of legacy U.S. automakers, Ford and General Motors, adopting Tesla’s charging system, the North America Charging Standard (NACS). This strategic move effectively established the NACS as the dominant charging infrastructure for 60 percent of the U.S. electric vehicle market, giving Tesla a significant edge over its competitors. While alternative charging systems exist globally, the partnership with Ford and GM solidified Tesla’s dominance in the American market.
Valuation and Comparisons
Tesla’s stratospheric price-to-earnings (P/E) ratio has raised eyebrows, as it far surpasses that of other automakers. For the uninitiated, the ratio is used for valuing a company. The ratio measures its current share price to its earnings per share (EPS).
With a forward P/E ratio of approximately 62, Tesla finds itself just below Amazon’s ratio of 63.7. In contrast, traditional automakers Ford and GM boast significantly lower P/E ratios of 8.2 and 5.6, respectively, as reported by Reuters. Analysts have drawn parallels between Tesla’s recent surge and the remarkable trajectory of Amazon, a company that defied investor expectations for years.
Tesla’s impressive rally carried consequences for short sellers, who suffered mark-to-market losses of over $7 billion during the 13-day period. This added to their year-to-date losses, which reached nearly $12.7 billion, according to S3 Partners, cited by Reuters. The rollercoaster ride experienced by Tesla’s stock price serves as a reminder of the inherent volatility in the market and the potential risks involved in betting against the company.
(With inputs from Reuters)
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