In the last five days, Tesla’s market cap has increased as much as the entire Detroit-three auto manufacturers’ combined.
Here’s the most likely theory of where the fund managers who are chasing retail investors into Tesla shares are going wrong.
Esha Dey reports for Bloomberg:
Still, a lot of big institutional investors now also want a piece of Tesla and the electric vehicle market, he said. “In a Covid-19 pandemic and a dark macro environment, the company just put up a 90,000 delivery number, especially when other automakers are seeing herculean challenges.”
Tesla said July 2 it delivered 90,650 cars in the second quarter, which compared with analysts’ average estimate for about 83,000 units.
The eagerness of big money to get into Tesla was also noted by Roth Capital Partners’ Craig Irwin, who said the company’s valuation was being driven by fund managers who have Tesla grouped with Netflix Inc., Amazon.com Inc., Facebook Inc. and the like, and were valuing it as a large-cap growth stock.
“Those managers do not understand that this is not a winner-takes-all industry that those other names are,” Irwin said, noting that there are more than 180 electric cars that are slated to come out by 2025. “There have been some duds along the way, but you can be sure there will be some winners in those 180.”
Tesla shares have gained at least 5% in four out of five sessions through Monday. While it may not be unusual for a company that has had one-day 20% gains twice in its history, the surge shows a consistency that wasn’t seen before. It’s the first time the stock has posted four out of five sessions with gains of such magnitude.
The latest rally has brought Tesla’s gains this year to $170 billion, an amount that exceeds the market capitalization of all but 30 companies in the S&P 500.
“Tesla’s valuation doesn’t make sense by any traditional measure,” said Ivan Feinseth of Tigress Financial Partners.
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