Is Tesla’s gravity defying stock price increase for real?
Tesla is always surprising us. One day it seems close to bankruptcy, the next day its stock rises to unimaginable heights –purely on the news that the company made a profit in the last two quarters. (imagine that: a company making cars is actually making some money. What novelty!)
That said, when we see this Tesla’s stock price increase of almost 100% in a matter of weeks, what are we looking at? Savvy investors who really know what they are doing? Or a completely irrational mania destined to end up badly?
Holman W. Jenkins of The Wall Street Journal is a skeptic. Here is an excerpt from a recent column he wrote for the WSJ.
“Am I a believer in Tesla at the current stock price? No. The company expects to sell 500,000 cars next year; its market cap, at $169 billion, is more than $50 billion higher than GM’s, Ford’s and Fiat Chrysler’s combined, businesses that collectively sell 17 million cars a year.”
“Tesla can earn a lot more profit per car, and can sell a lot more cars than it does now, and still its stock is priced as if its future profits will be coming from some unnamed something that is not the car-making business.”
–Holman W. Jenkins, Jr. Tesla’s Stock Goes to Heaven The Wall Street Journal, Feb. 4, 2020 www.wsj.com