Market Overview

Tesla Surpasses Toyota To Take The Crown As World's Most Valued Automaker

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Tesla Surpasses Toyota To Take The Crown As World's Most Valued Automaker

Electric vehicle pioneer Tesla Inc (NASDAQ: TSLA) is now the undisputed leader among automakers in terms of market capitalization, thanks to the breathtaking rally in its stock seen since it bottomed in mid-March during the coronavirus-induced market meltdown. 

Tesla's Staggering Valuation: Tesla's shares are valued at $208.4 billion, based on the current stock price of $1,123.65 and 185.48 million outstanding shares.

In comparison, Japanese automaker Toyota Motor Corp (NYSE: TM), which held the top spot previously, has a market cap of $202.74 billion, based on the closing price of its shares on the Tokyo Stock Exchange Wednesday.

The feat is commendable for a relatively new entrant in the sector. Tesla was founded in 2003 and went public in June 2010 by offering 13.3 million shares at $17 each. 

Tesla's market cap breezed past the combined market cap of traditional U.S. automakers General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F) in early January, when its shares hit a then-record high of $492.14, rendering the valuation at $89 billion.

When debt is included, Toyota is valued at $284 billion compared to Tesla's enterprise value of $207 billion, the Financial Times reported, citing data from Sentieo.

Tesla Catalysts Driving The Rally: Tesla shares broke above a long-term resistance around the $385 level in mid-December 2019. After that, the stock saw a meteoric rise and peaked at $944.78 Feb. 19.

The momentum in shares was supported in part by the progress Tesla was making in China, the hot-and-happening EV market. The company began rolling out the first Model 3 vehicles from its Shanghai Gigafactory in late December 2019.

After turning profitable in the third quarter of 2019, Tesla reported a profit yet again in the fourth quarter. Belying expectations, the company continued its profit-generating streak and reported a surprise profit for the first quarter of 2020.

The stock also received support from the news flow related to Model Y crossover SUVs, which began rolling out in mid-March, and its Cybertruck.

See also: Tesla Now China's Largest EV Manufacturer By Output: Report

After the mid-February peak, the stock experienced a downturn along with the broader market in the aftermath of the COVID-19 pandemic.

The stock retreated to a low of $350.51 March 18, translating to a peak-to-trough decline of about 63%.

Tesla's stock took off from there at a breathtaking pace and breached the $1,000 level intraday for the first time June 10.

After moving back and forth around the mark on investor worries over a weak second quarter due to the COVID-19 impact on deliveries and production, the shares have seen a marked upward momentum in recent sessions. 

The stock hit new highs —both intra-day and closing — both Monday and Tuesday, and appears on track to close at a fresh high Wednesday.

Recent optimism concerning a quarter-end-push by Tesla that could lift its performance beyond expectations despite a lukewarm April-May period has generated renewed buying interest in the stock.

Where Tesla Is Headed: Tesla, being the EV pioneer, has superior technology and a competitive edge.

Recently, the company announced its Model S Long Range Plus electric vehicles in North America, which have an official EPA-rated range of 402 miles.

The company is also working with Chinese supplier CATL on a 1-million-mile battery. 

Apart from selling cars, Tesla has potential opportunity in the form of high-margin recurring software revenue through is full-self driving advanced driver assistance system, according to Morgan Stanley analyst Adam Jonas.

Notwithstanding its prospects, the sell-side is skeptical about Tesla's heady valuation. This is reflected by the average analyst rating of Hold for the shares.

TSLA Price Action: At last check, Tesla shares were rallying 4.1% to $1,124.12. 

Related Link: Tesla On Track To Beat Q2 Deliveries Forecast, Analyst Says

Photo courtesy of Tesla. 

 

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