By reaching a market capitalization of as much as $51.105 billion which is now higher than General Motors’s, on Monday, Tesla Inc briefly became the most valuable U.S. car maker.
Before dropping down below that of GM’s its market value was at one point larger than GM’s, which was $51.095 billion, as the luxury electric car maker’s stock rose as much as 3.15 percent to a new record high of $313.73 as it was helped by an analyst’s recommendation.
As investors took positively to the bet that the company and its Chief Executive Elon Musk will revolutionize the automobile and energy industries, Tesla shares and its valuation has surged 35 percent over the past month.
Valued at $667,000 per car sold last year, $102,000 for every car it plans to make in 2018 is equivalent of the present market capitalization of Tesla. $5,000 per car it sold in 2016 is the equivalent of market capitalization of GM by comparison.
Proponents argue that its valuation is reasonable based on long-term expectations for Tesla’s growth and strongly believe Tesla will become a carbon-free energy and transportation heavyweight.
Tesla’s Nevada battery cell plant aimed at driving down manufacturing costs and opportunities from Tesla’s acquisition last year of money-losing solar panel installer SolarCity are also pointed out by them.
“Even with all the risks, we think growth investors can’t afford to ignore this stock,” wrote Piper Jaffray analyst Alexander Potter in a report on Monday, upgrading Tesla to “overweight” from “neutral”.
GM, Ford and other deep-pocketed manufacturers that are ramping up their own electric-vehicle offerings post the risk of the likely overtaking of Tesla in the near future and Tesla’s growth targets are unrealistic are the arguments that skeptics of the company put forward.
“As a car company alone, Tesla is crazy high valuation. As a battery company – one that expands and innovates substantially – maybe the valuation can work,”, said Jeffrey Gundlach, who oversees more than $105 billion in assets at Los Angeles-based DoubleLine Capital, to Reuters last week.
And the Silicon Valley car company is rushing to quickly ramp up its factory to reach a production target of 500,000 cars per year in 2018 and is also rushing to launch its mass-market Model 3 sedan in the second half of 2017. Missing its target of at least 80,000 vehicles, last year it sold 76,230 cars. By comparison, GM sold 10 million cars and Ford sold 6.7 million.
(Adapted from Reuters)