Why is Tesla stock so high? This is a question that many investors are asking these days. As a result, we’ve written this article to assist you. Elon Musk’s leading vehicle company, Tesla, shares this year are trading at around $1,000. This is after they dropped from an all-time peak in the latter months of 2021. At the beginning of March, the stock increased by more than 50%.
This went from $766 on the 14th of the month to $1,145 only 21 days later. As a result, specific primary triggers shifted the dial on Tesla stock in 2022. Let’s examine them deeper and see whether the firm is still a good investment.
Furthermore, analysts disagree on whether Tesla’s exorbitant stock price is justified. Since its opening in 2010, Tesla’s stock has increased by more than 20,000%. Production growth, EV fever, and front person Elon Musk have fueled the explosive surge.
However, many Wall Street experts believe Tesla’s inflated stock price is doomed to burst. Whether you like it or not, Tesla’s stock is on an upward trend.
Since going public in 2010, the company’s stock has increased by more than 20,000 percent, far surpassing the market. This has continually defied Wall Street’s projections, making early investors millions. It would be an oversimplification to suggest that the expansion rate is unusual.
Why is Tesla Stock so High?
Tesla’s stock price has risen by more than 700 percent in the past year, gratifying Tesla’s investors and admirers. Many veteran Wall Street experts, on the other extreme, are baffled. Small investors lost $38 billion during Tesla’s historic surge in 2020.
Due to its meteoric rise, Tesla has risen above giants like Toyota and Volkswagen as the most prominent global automotive manufacturer. It has also made Elon Musk, Tesla’s CEO for the last 13 years, the wealthiest person on the planet due to his significant ownership of the firm. Overall, the stock of Tesla is so high because of the following factors:
Confidence
To begin with, Tesla’s stock has grown due to its confidence. Musk’s carmaker has finished its sixth straight profitable quarter and its first full year in the black after years of struggle.
In 2020, the firm exceeded Wall Street’s delivery expectations in many quarters, producing over 500,000 automobiles (the most of any year to date). Then, ahead of time, they started to sell their fifth production car, the Model Y.
According to investors and experts, Tesla’s industrial output will rise significantly in 2021 when new production factories in Berlin, Germany, and Austin, Texas come online. And many believe that demand for Tesla vehicles will continue to rise, particularly in China, where the electric vehicle manufacturer has already done extraordinarily well.
Tesla also benefits from a broader enthusiasm around electric car stocks, as tighter emissions restrictions globally present a clearer image of a future auto sector characterized by zero and low-emission automobiles. It has maintained its dominance in the electric vehicle industry which is expected to develop significantly shortly.
Tesla’s New Berlin Gigafactory Opened
In March, Tesla CEO Elon Musk cut the ribbon on the company’s German “gigafactory.” This occurred after an eight-month delay in the plant’s launch due to nationwide licensing issues. According to the business, the €5 billion facilities are expected to produce 500,000 automobiles each year. This is in addition to making 50 GWh of batteries every year.
Initiatives for an Intensive Price Strategy
In Q1, raw material pricing pressure from the international logistics issue appeared to strain Tesla. This was not little because the firm’s electric battery activities were especially vulnerable to escalating nickel and lithium bicarbonate prices.
On the other hand, Musk rose to the occasion, raising his pricing twice in days, this strategy seemed to impress investors, and it most certainly influenced the stock’s price action over the month.
The Possibility of a Stock Split
A stock divide in the summer of 2020 helped fuel retail investor excitement by making Tesla shares cheaper to individual investors (despite altering nothing about the firm’s intrinsic worth). Later that year, Tesla got added to the S& P 500, a de facto show of support from the index board that obliged investors that monitor the index to acquire the stock.
Even if such auxiliary ventures haven’t yet materialized, Tesla’s most giant bulls greatly value its ability to produce money outside its primary vehicle industry. They claim that a self-driving taxi service, a power storage unit, and technology advancements such as Tesla’s long-awaited “full self-driving” capability might enable the firm to achieve profits never seen before in the automobile industry. This justifies its present exorbitant price.
Excessive valuation
Tesla benefitted from several additional tailwinds in March and other triggers that increased the business. This collaboration offers the car company a distinct edge over its competitors.
This is significant since the present economic climate is not always favorable for developing a high-growth company like Tesla. This is true since rising prices and interest rates are generally the starts of the end for similar businesses. On the other hand, the firm’s many diverse commercial moats provide it with a considerable advantage over the competitors in this area.
The recent increase in oil and gas costs is fantastic advertising and prototypes for Tesla’s electric automobiles.
Tesla’s automobiles are, if nothing else, an economically beneficial mode of private transport, as one of the top brands in the “anti-fossil fuels” arena, as increasing gas prices reveal to any still-cynical citizens. This also serves as a hedge against the rising cost of hydrocarbon fuels.
Tesla has a large moat.
In and of itself, Tesla’s globally integrated architecture is a moat. The business is more than simply a vehicle maker. It also owns and operates its Charging infrastructure, retail shops, and portable ranger service.
Tesla also benefits from brand loyalty bolstered by one of today’s most compelling corporate executives. It also features a slew of side projects that all contribute to the overall success of the company’s primary product. Tesla Energy and Autonomy are examples of this.
Inspiration from social media
Another aspect to consider is Elon Musk, the company’s outspoken CEO. Tesla devotees and investors have flocked to the quirky, meme-loving tycoon. This is primarily due to his witty Twitter feed and other bold endeavor such as SpaceX, Worldpay, and Neuralink. Although some have attempted to imitate it, no other carmaker has it.
Frequently Asked Questions
Why is Tesla stock so high?
The stock of Tesla is so high because of the following factors:
- Confidence
- Tesla’s New Berlin Gigafactory Opened
- Initiatives for an Aggressive Price Policy
- The Possibility of a Stock Split
- Excessive valuation
- Tesla has a large moat.
- Inspiration from social media
Who is the largest shareholder in Tesla?
Musk is Tesla’s majority investor, controlling over 175 million shares, or nearly 17 percent of the firm. Musk has previously sold big blocks of stock. After surveying his Twitter followers, he traded 15 million stocks worth over $16 billion last year.
Is Tesla’s stock overpriced?
Yes. From a traditional standpoint, TSLA is still overpriced. However, the stock is more than simply its profits and market capitalization. TSLA has risen despite being fundamentally overpriced for nearly a decade.
What makes Tesla so valuable?
Tesla’s stock price depends on demands for technology, electric vehicles, and infrastructures, not on how many cars it sells.
Conclusion
The stock price of Tesla has experts on Wall Street losing their minds. To easily understand why, the above tips will be indispensable for you.
I am an Automotive specialist. I graduated from Michigan with Bachelor in Automotive Engineering and Management. Also, I hold degrees in Electrical and Automation Engineering (BEng), Automatic and Industrial Electronic Engineering, and Automotive Technology. I have worked at General Motors Company for over five years as the Marketing Operations Production Coordinator. Now, I own my garage in Miami, Florida. I love cars and love to share everything about them with my readers. I am the founder of the Automotiveex blog, where I share everything about automotive, like car news, car mechanical issues, and anything else that comes up in my blog posts.
