Tesla shares are making a comeback as investors expect the Elon Musk-led electric car maker to handle the crippling semiconductor shortage better than its critically disrupted rivals.
The stock gained as much as 0.9% to $ 850.99 in pre-market trading in the United States on Monday, forecast for a 50% increase from the March 8 low of $ 563. It comes after eight weeks of gains, its longest winning streak since before the Covid-19 pandemic hit markets. The rebound makes it the sixth publicly traded company in the United States, well ahead of Berkshire Hathaway Inc.
“We believe an evolving green tidal wave will push Tesla shares higher despite the short-term chip shortage with third quarter earnings this week another positive catalyst,” the analyst wrote. by Wedbush Daniel Ives in a Sunday post.
Tesla shares have been climbing steadily in recent months, helped by strong quarterly results which showed the company is faring far better than traditional automakers in dealing with the semiconductor shortage. Third quarter deliveries exceeded all estimates.
Telsa’s handling of the chip shortage has even been praised by one of its biggest competitors.
“An example of Tesla’s speed: They are handling the chip shortage very well – the reason: They are developing their own software,” said Herbert Diess, president of Volkswagen AG in a post on LinkedIn. “In just 2-3 weeks, they had new software that allows different chips to be used. Impressive.”
Tesla is expected to release its third quarter results on October 20. It is one of the very few global auto stocks to benefit from upward revisions to analysts’ earnings estimates over the past month, while most other automakers have suffered cuts due to shortage of chips. .
Still, some say Tesla’s pioneering qualities in the electric vehicle race do not warrant its assessment. The company is not only the largest automaker in the world, its market capitalization of over $ 845 billion is well above that of all the major automakers combined. Critics say the company’s market capitalization also doesn’t reflect the wave of competing cars from mainstream automakers expected to hit the market starting next year.
Competition is indeed intensifying. After being on the sidelines for years, several large traditional automakers have announced aggressive plans to build electric vehicles and develop the required ecosystem that includes batteries and charging station networks.
On the flip side, bullish investors and analysts believe Tesla should not be compared to its automotive counterparts at all. Rather, it is a technology company and is properly valued accordingly.
Tesla shares are currently trading at 120 times their expected 12-month earnings, making them the most expensive stock in the NYSE + FANG index, of which the other nine members include Nvidia Corp., Alphabet Inc., Apple Inc. , Twitter Inc., Facebook Inc., Amazon.com Inc., Netflix Inc., Alibaba Group Holding Ltd. and Baidu Inc.
Despite a strong push from historic automakers around the world to develop electric vehicles and the emergence of several new players, Tesla has consistently managed to maintain its dominance in the space, producing some of the best-selling electric vehicles in the world: the model 3 and model Y..
“Taking a step back with the chip shortage being a major surplus to automotive space and logistics issues globally, these delivery numbers combined with this week’s likely profit beating point to a trajectory in vehicle demand. electrics that looks robust enough for Tesla as we approach Q4 and 2022, ”Ives wrote.
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