Tesla’s share price soared after breaking $500, giving it a market value of more than $100 billion. Tesla has gained nearly 3,000 percent in a decade from a $17 launch price a decade ago. Tesla opened today up 4.35 per cent at $571, giving it a market capitalisation of about $102.9 billion, becoming the first US auto maker to be valued at more than $100 bn.
Earlier, brokerage Wedbush reiterated its “neutral” rating on Tesla shares in April 2019, but raised its target price to $550 from $370, citing strong demand in China.
Tesla’s share price soared after breaking $500, giving it a market value of more than $100 billion. Tesla has gained nearly 3,000 percent in a decade from a $17 launch price a decade ago.
Not only that, gm and Ford have a market capitalisation of about $36.6 billion and $50 billion, respectively, at the latest closing prices, meaning Tesla’s market capitalisation has exceeded gm and Ford’s. Although sales are still far apart, the young car company, in terms of market capitalisation alone, has overtaken traditional established car companies in the era of new energy vehicles.
If you keep an eye on Tesla’s friends for a long time, it may find that Tesla is on the brink of death in 2019, when it reported a much-anticipated quarterly loss in April and a 31 percent drop in quarterly deliveries, causing its share price to fall below $200. The plunge in share prices has been dying with huge losses on Tesla’s bonds and the risk of possible bond redemptions. For a moment of panic, many bearish investors have said Tesla’s bankruptcy is entering the countdown.
But that all ended on October 23, 2019, when Tesla reported a stunning reversal in its Q3 earnings, which turned out to be profitable in the face of falling revenues, and the prospect of a strong injection of power for Tesla, which has since doubled its share price.
The real reason for driving Tesla’s share price
In fact, the decline in third-quarter revenue is also reflected in the delivery report, in the delivery growth, the average price of Tesla cars fell, it is not difficult to predict that Tesla revenue is not as expected.
Tiger Securities’ investment team believes that the real reason for driving up Tesla’s share price depends on Tesla’s ability to make money, with Tesla’s gross profit rebounding sharply in the third quarter and net profit growth. This is mainly due to lower raw material and manufacturing costs, continuous improvement in vehicle quality, and ongoing personnel optimization and business restructuring.
“China Speed” Helps Tesla Q4 Delivers Vehicles Exceed Expectations
In addition to the stunning reversal of Q3 results, q4 deliveries announced last week were equally surprising. Tesla delivered a record 112,000 vehicles in the fourth quarter, 6,000 more than analysts had expected. Tesla delivered 367,500 vehicles in 2019, exceeding its previous production guidance and up 50 percent from a year earlier.
Tiger Securities’ investment and research team believes that, unlike NIO’s financing problems, it has been constraining Tesla’s development. Musk boasted that “500,000 electric cars will be built by 2018 and capacity will be expanded to 1 million by 2020.” “Despite the abundance of ideals, it’s often very realistic, and in fact Tesla has only 250,000 vehicles in capacity for the whole of 2018.” But with the completion of Tesla’s Shanghai plant, Musk’s mouthpiece is likely to be realized.
l After just 168 working days, the Tesla Shanghai plant completed all the formalities from license to start power supply.
l The Shanghai plant began production on Q4 as scheduled, and on December 30, 2019, Tesla completed the first Model 3 for employee delivery. At present, the production of the Shanghai plant can reach 28 units per hour, operating time of 10 hours per day, the current weekly output of more than 1000 units.
“In our new plant in China, we have proven a weekly production capacity of more than 3,000 units, excluding local battery pack production starting in late December,” Tesla said. Tesla expects capacity at its Shanghai plant to exceed 150,000 vehicles.
While Tesla’s profit margins are likely to come under pressure by 2020 due to the introduction of model Y and subsequent Cybertruck, the Shanghai plant’s investment has helped ease the pressure on this part of Tesla, with the cost per unit of the Shanghai Port-by-Port plant reducing the cost of producing model 3 by 65% compared to the U.S. plant. That’s great for Tesla, which is committed to improving efficiency, and the Shanghai-based port-by-port plant is faster than expected, and Tiger Securities’ investment and research team believes that as a result, Tesla’s future gross profit could rise to more than 25 percent.
Cash is plentiful, bond default risk falls
Tesla has another $5.8 billion in debt due over the next five years, including asset-backed loans, according to incomplete statistics from Tiger Securities Investment and Research. Tesla’s ugly negative operating cash flow has turned positive. Operating cash flow exceeded $1 billion in the third and fourth quarters of 2018, with investment spending turning negative again in the first quarter of 2019, but the second and third quarters have returned positively. At the end of last year, Tesla began paying off some of its debts. Tesla’s free cash flow strengthens its balance sheet
In addition, with Tesla’s share price above 500, higher than the conversion price of convertible bonds, it is believed that a large number of convertible bonds will become stocks. Tiger Securities’ investment and research team roughly estimates that $4 billion in debt will be converted into equity over the next four years, with Tesla’s cash flow more abundant, the risk of a bond default improving dramatically and its balance sheet looking better.
Is Tesla expensive?
As Tesla’s share price soars, the shorts are in despair, with shorts losing $8.4 billion ($58.558 billion) in the past seven months, according to seventy-eight billion shorts, according to s3Partners, a financial analysis firm.
Tesla’s recent rally has nothing to do with short-term sales, which have pushed up the stock price even further as tesla shares have risen and short slackers have closed their positions in an effort to reduce losses, with Tesla’s short positions plummeting from 43 million shares to the most recent 26.25 million shares, which have pushed up the stock price even further.
In the short term, though, Tesla’s surge has some short-term factors, but in the long term, Tesla is still in a reasonable range of valuation.
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