- Elon Musk stock is staging a comeback as investors expect Tesla carmakers to navigate the crippling semiconductor shortage better than rivals which have been severely disrupted.
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The stock gained as much as 0.9% to $850.99 in U.S. premarket trading on Monday, setting a 50% increase from the March 8 low of $563. This comes after eight weeks of gains, its longest winning streak since before Covid - 19 pandemic roiled markets. The rebound makes Berkshire Hathaway Inc. the sixth biggest publicly listed company in the U.S. firmly ahead of the company of Listed Investors and Associates (GTA).
We believe an expanding green tide will push shares of Tesla higher despite the near-term chip shortage with 3 Q earnings this week another positive catalyst, writes Wedbush analyst Daniel Ives in a note from Sunday.
Tesla shares have been steadily rising in recent months aided by strong quarterly results that showed the company fared much better than traditional carmakers in handling the semiconductor shortage. Deliveries for the third quarter beat all estimates.
Telsa's handling of the chip shortage even received praise from one of its biggest competitors.
One example of Tesla's speed: They handle the chip shortage very well the reason: they are developing their own software, said Herbert Diess, chairman of Volkswagen AG in a LinkedIn post. Within just 2 - 3 weeks they had a new software which allows to use different chips. Tesla is scheduled to report its third quarter earnings results on Tuesday, October 20. It was one of the very few global auto stocks to enjoy downward revisions from analysts in earnings estimates in the last month, while most other automakers faced cuts due to the chip shortage.
Still, some say Tesla s trailblazing qualities in the EV race do not justify its valuation. The company is not only the largest automaker in the world, its market capitalization of over $845 billion is much bigger than all the top car companies put together. Critics say the company s market capitalization also fails to reflect the wave of competing cars from legacy auto companies expected to hit the market beginning next year.
Competition is actually heating up. After being on the sidelines for years, several major legacy auto companies have announced aggressive plans to build EVs and develop the required ecosystem which includes batteries and charging station networks.
The end of Tesla s domination may be closer than it looks like at first.
Bullish investors and analysts, on the other hand, say that Tesla shouldn't be compared to its auto peers at all. It is rather more like a technology company and is correctly valued accordingly.
Tesla shares currently trade at 120 times their 12 month forward earnings, making them the most expensive stock on the NYSE FANG Index, with other nine members including Nvidia Corp. Despite a big push from legacy automakers across the globe to develop electric vehicles, and the emergence of several new players Tesla has still managed to maintain its position in the space by producing some of the best selling EVs globally: Model 3 and Model Y.
With the chip shortage a major overhang on the auto space and logistical issues globally, these delivery numbers combined with this week s likely earnings beat speaks to an EV demand trajectory that looks quite robust for Tesla heading into 4 Q and 2022, Ives wrote.
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