Californian EV maker Tesla has traded as a $US100 billion ($A146 billion) company for the first time as stocks surged to more than $US550 ($A812) in after hours trading on Tuesday evening (US time).
The value of Tesla stocks have been on a solid upturn in past weeks, and has now more than tripled since its 2019 June low of $176.99 ($A259.01) ahead of a report on its final earnings for 2019 and future outlook on Wednesday week (US time).
This latest surge makes Tesla now the first publicly listed US carmaker valued at more than $100 billion in history, and will also see Tesla CEO and co-founder Elon Musk unlock a series of “moonshot award” tranches if the valuation is sustained at that level for both a one-month and six-month average.
The pay package will be paid in 12 increments starting from $US100 billion to $US650 billion ($A950 billion), with the new valuation putting Musk a step closer to a $US346 million ($505 million) payday no doubt giving the visionary entrepreneur yet another reason to dance.
Noted in a tweet by Bloomberg electric vehicle reporter Tom Randall, the $US555 stock value is an indication of the confidence in the pioneering car maker which reported another record quarter for deliveries in Q4 2019 on January 3, and is expected to bring to market its latest Model Y in Q1 2020.
— Tom Randall (@tsrandall) January 21, 2020
The latest uptick comes at the same time as news of a legal settlement between Tesla and the state of Michigan, home of “big three” auto giants GM, Ford and FCA, over a rule that disallowed the company from selling cars unless through dealerships or subsidiaries instead of online.
As a result of the new settlement, Tesla will now be able to sell cars in the state of Michigan, as well as set up a centre from which to deliver vehicles, service through a subsidiary, and set up small showroom locations.
In response to the news, Elon Musk tweeted a short and succinct, “Yay!”
— Elon Musk (@elonmusk) January 21, 2020
As an innovative company that seeks to permanently disrupt the automotive and fossil fuel industry with its zero-emission electric cars, Tesla has attracted no end of naysayers and has become the most shorted company in history.
When the stock price reached more than $US500 last Monday valuing Tesla at $US94 billion and worth more than US auto giants General Motors and Ford combined, short-sellers were burnt to the tune of $US1.25 billion ($A1.83 billion). That figure has now increased again.
The surge has seen some Tesla bears switch positions and others raise their price targets, such as Jefferies International Ltd to $US600 ($A878) and as Oppenheimer to $US612 ($A896). Oppenheimer analyst Colin Rusch said he now considers Tesla an “existential threat” to legacy carmakers.
Investment firm New Street most recently set what is now the highest price target on Wall Street at $US800, with analyst Pierre Ferragu citing “technological dominance, strong sustained demand, [and] Tesla’s ability to execute” and the view that from 2025, Tesla will be delivering some 2-3 million electric vehicles per year.
“We conclude that over the past 1.5 years several key dimensions of our thesis (technological dominance, strong sustained demand, Tesla’s ability to execute) played out in line with our expectations.
“We did not anticipate the decline in Model S&X deliveries last year, as Model 3 ramped, but this has limited implications for our long-term perspective,” wrote Ferragu in a note as reported by CNBC.
“We hence stick to our views and expect Tesla to sell 2-3 million cars per year after 2025, at industry leading margins, justifying a market capitalisation of $230-350 billion, or ~$1,100-1,700 per share.
“Discounted back to early 2021, we would see that fully priced with a stock in the $640-960 range. On that basis, we increase our target price to $800.”
With the Shanghai Gigafactory completed in late 2019 and now pumping out “Made-in-China” Model 3s, as well as a Model Y program now underway, and a purchase contract now approved by Tesla for a fourth Gigafactory in Brandenburg near Berlin, there are plenty of indicators of more future growth for the company.
Despite this, doubters posit that without one single annual profit under its belt, a debt load of more than $US10 billion ($A14.63) and none of the decades of experience garnered by legacy automakers, Tesla’s exploding valuation “extremely unusual“.
There is just one week left now until the upcoming Q4 2019 Financial Results and earnings call – at which it is expected there will be updates regarding both new Gigafactories, and anticipation of a possible announcement for the start of Model Y deliveries in the US.
This will be followed by a “Battery Day” slated for the first months of 2020 that could see Tesla make a major leap forward in battery density putting it even further ahead of legacy car makers, many of which are only just starting their electrification journeys.
This article has been updated to clarify that Musk’s tranches are unlocked if the valuation is sustained at that level for both a one-month and six-month average.