Can Tesla's Share Price Maintain Its Spectacular Ride Higher?

Can Tesla's Share Price Maintain Its Spectacular Ride Higher?

CMC Markets  | Jan 26, 2021 11:55

It’s been a stellar final quarter – as well as full year – for Tesla Inc (NASDAQ:TSLA)’s share price, which has gained in excess of 1,000% since last March's low, in what has so far proved to be a one-way ticket to the moon for its shareholders.

Capping a strong year for the US electric vehicle and battery manufacturer, Tesla was admitted to the S&P 500 in December, becoming the US index’s sixth-largest component on entry, despite the company having yet to make an annual profit.

Tesla share price hits all-time high

Electric vehicle (EV) stocks had a meteoric rise in 2020, and Tesla’s share price was certainly no exception. Tesla shares soared an astronomical 1,161% from their 52-week low of $70.10 on 18 March last year, to hit all-time high at $884.49 on 8 January. Since then, Tesla shares have paused for air, closing last week a touch off the record high, at $846.64.

With a market capitalisation in excess of the entire automotive sector, Tesla’s shares have an almost cult-like status among their devotees. Telsa’s share price gains mean it’s now the most valuable automobile manufacturer in the world. And despite – or perhaps because of – its rapid share price rise, some analysts believe there is still room to go higher. The Bank of America’s John Murphy has suggested Tesla’s share price could hit $900 a share, and in view of the spectacular gains over the last 12 months, and the growing popularity of EV stocks in general, it wouldn’t be too much of a surprise to see that level breached.

Sales miss target despite China factory boost

Tesla’s share price gains have come despite the company selling less than 500,000 cars this year, and therefore missing its target for the second year in succession. It was, however, only a minor miss over the year, after Tesla confirmed it sold 499,000, helped by the addition of its new Chinese factory, which boosted production capacity.

China is certainly one region in which Tesla has been spending heavily. The country now has the largest EV market in the world, with 1.3m vehicles sold last year according to evvolumes.com, well ahead of Germany in second place, with 0.4m vehicles sold. Tesla has also continued its rollout of supercharging stations in China, and recently delivered its first Chinese-built Model Y cars. The fact that Tesla is now able to manufacture cars directly in China should aid Elon Musk’s firm, by lowering production costs and increasing profit margins.

Tesla on course for first annual profit

Tesla has also done well in managing to post consistent profits on a quarterly basis over the past 12 months, although this has only been achieved by sleight of hand in the form of the sale of regulatory credits, and energy storage sales. Tesla made a profit of $331m in Q3, but on car sales alone, the company is still losing money.

With other mainstream automakers now making inroads into the electric vehicle market, it may only be a matter of time before Tesla’s first-mover advantage becomes much more difficult to maintain. Profit for the fourth quarter is due to come in at $1 a share.

Tesla releases issues its fourth-quarter and full-year earnings update after US market close on Wednesday 27 January.

"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "

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