After shares in Tesla Inc. soared 40% in two days last week, the company’s fans were inspired, its skeptics were unmoved, founder Elon Musk’s personal wealth ballooned by US$13.5 billion, and a news report said Saudi Arabia’s sovereign wealth fund had missed the fun by selling most of its stock too soon.
Investors began pouring money in last week, after the Palo Alto-based electric vehicle maker announced it had exceeded analysts’ expectations for the number of cars it could sell, and turned a profit for two quarters in a row.
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“Investor enthusiasm over the company’s prospects began last week, when on Wednesday the company said it expects to sell 500,000 vehicles this year, an increase of about 50% from last year’s level,” CBC reported February 4. “Tesla shares closed at US$887 apiece [last] Tuesday, a level that means the company has more than doubled in value since the start of 2020.”
But while investors voted with their pocketbooks, analysts were unmoved. “I wish we owned the stock, but we don’t participate in manias,” Barry Schwartz, chief investment officer at Baskin Wealth Management, told CBC. “People are only buying this stock because it’s going up in price—there’s no way to justify the valuation.”
With nothing in Tesla’s underlying financial performance to justify the numbers, “it reminds me of the dot-com boom,” he added.
“At current prices, Tesla is worth roughly $150 billion,” CBC notes. “That’s more than U.S. automakers GM, Chrysler, and Ford are worth combined, even though that trio sells more cars in two weeks than Tesla does in an entire year.”
Reuters came up with a more in-depth look at the retail investors and analysts who are very taken with Tesla stock, and those who aren’t.
One major investor that may not be pleased with the stock surge is the $320-billion Saudi Public Investment Fund, previously one of Tesla’s five biggest owners, which sold most of its 8.2 million shares during the last three months of 2019. “Unless it bought back in, the sovereign wealth fund will have missed out on a huge gain,” The Telegraph reports.
