Tesla celebrated its 10th anniversary in the US stock market in the best possible way, which is to manage the world’s most valuable auto company.

The rise of the company, named after Nikola Tesla, a physicist, came after many years of suspicion, negative news and a constant bet on an imminent collapse.

Despite this, weak financial results and production appear to deviate a lot from the industry giants around the world. Investors are betting on the future that might carry Tesla’s control of the electric car market.

Suspicion, losses and bets of failure

Time: July 25, 2019

The event: Tesla shares witnessed one of its biggest daily losses, which amounted to about 14%, to close at $ 228, after severe financial losses, less than expected revenues, and the departure of the chief technology officer and co-founder, “GB Stir pool”.

Tesla’s stock losses and negative news related to the company were not a unique event at this time, but it was a “natural reality” at the time.

Although the company achieved a record delivery rate in the second quarter of last year that exceeded 95,000 cars, the low average selling price made the money bleeding continue at a rate that exceeded expectations.

In the first and second quarters of last year, Tesla recorded net losses of $ 702 million and $ 408 million, respectively.

The problems of the electric car company were not limited to financial losses and failure to achieve production and delivery targets, but the founder and CEO had a large share of the causes of suffering.

Elon Musk significantly raised investor expectations regarding production and delivery, which made them not accept lower results even if they were much better than previous years, as was the case with deliveries in 2018, which came higher than all previous years combined.

Mask’s strange and unusual comments in the world of CEOs also caused investor anxiety and the media attack and put additional negative pressure on the stock.

MASC’s tweet in August 2018 about converting the company from a public institution listed on the stock exchange to a private entity and later retracting this announcement was a reason for investigations by the American Stock Exchange Authority followed by a severe penalty of a fine of $ 40 million equally between Tesla and Musk in addition to force the latter to step down as CEO for 3 years.

Consequently, short selling or borrowing short sale investors had no more attractive target like Tesla, as 29% of the shares available for trading in May 2019 were involved in lending to investors who bet the stock would drop further.

In September 2019, Tesla was ranked seventh in the list of the largest auto companies in the world, driven only by the hope of some investors about the future and what it could bring to the electric car company fuel giants.

Pros drops heaped

The final weeks of last year came as a turning point in Tesla’s investor outlook.

After introducing the “Cyberattack” truck that surprised the followers, Tesla began delivering cars from its new factory in Shanghai, China, less than a year after the start of construction of the factory, ensuring its wider spread in the largest auto market in the world.

A few weeks later, Tesla announced a record delivery rate in the fourth quarter of last year that exceeded analyst expectations.

The company delivered 112,000 cars worldwide in the last three months of 2019, to finally achieve the figures achieved with the declared goals of “Musk”.

A picture containing lamp, food

Description automatically generated

In the total of 2019, Tesla delivered about 367,000 cars to customers, which is equivalent to an increase of about 50% compared to the previous year.

The company that owns two factories in the US “Vermont” and “Shanghai” in China and is working on a third building in Germany has 4 cars, which are “Model S”, “Model 3”, “Model X” and “Model Y”.

Positive news continued last April, with Tesla announcing surprising profits in the first quarter of this year, with increased revenues and more cash in its possession of more than $ 6 billion.

In the middle of the following month, Musk decided to challenge government authorities and restore work at the Fairmont factory, despite the ongoing national closure process to control the Corona epidemic.

The largest in the world

Days after the company, which was founded 17 years ago, celebrated the tenth anniversary of the stock market, it managed to overtake the top spot in global auto companies, bypassing Toyota, which produced 2.4 million cars in the first quarter of this year, compared to only 103 thousand cars for Tesla.

The company, which was launched on the Nasdaq Stock Exchange on the twenty-ninth of June 2003 at a price of $ 17 per share and a total value of $ 1.7 billion, has reached a market value at the end of the third session of July 2020 about 224 billion dollars with the share price reaching more than 1208 dollars.

The stock jump from $ 418 at the end of last year means a nearly 189% rise since the beginning of this year.

Tesla not only managed to top the list of global car companies, but also exceeded the market value of General Motors, Ford and Fiat Chrysler combined.

Gains in Tesla share, benefiting from the positive news of the company, amid the suffering of traditional car companies in the world from declining sales and consumer expectations for environmentally friendly electric vehicles in the coming years.

And the electric car company announced the arrival rate of deliveries in the second quarter of this year to the level of 90.650 thousand units, to easily exceed all expectations.

“The truth is that I do not care completely, these numbers rise and fall, but what really matters is the work of products that people love.”

Although Tesla deliveries fell by 5% in the second quarter on an annual basis, they came better than estimates in the closing period due to the global epidemic, in addition to the sharpest decline for other car companies such as General Motors, Toyota, Ford and others.

Asked about “Mask,” about his comment about the increase of his wealth 20 billion dollars since last March to reach 46 billion dollars, the American billionaire replied: “The truth is that I do not care completely, these numbers rise and fall, but what really matters is the work of products that people love.”

A person standing in front of a building

Description automatically generated

Do you really deserve it?

Each story has two conflicting sides, and while Tesla has jumped to the forefront of global auto companies, doubts still surround the logic of the matter.

Tesla’s stock is currently trading about 230 times as expected revenue this year, which prompted the company’s founder, Musk, to talk about the extremely high price of the stock now.

While analysts believe that the evaluation of the electric car company is exaggerated considering the volume of production and the fact that no annual profits have been recorded yet, others are betting on the future alone.

Analysts’ average expectations for the target price for the stock are currently $1394, and most of the recommendations are to “sell the stock.”

But the optimistic aspect of Tesla’s future talks about the possibility of additional growth for the company’s business and sales due to the expected demand in China after the operation of the Shanghai plant, in addition to the global trend of clean energy.

Despite the controversy of talking about reality and the shape of the future, the only fact currently is that the American company has become the largest car maker in the world, bypassing all the companies of the Old Testament.

Mohamed Shraka

Head of Business Development (EMEA)
mshraka@tvmarkets.com