- I don't think any other stock has captivated investors
on Wall Street or Main Street the way Tesla has.
It's just become one of the most controversial names
and one of the most watched names out there.
This summer, Tesla became the most valuable auto company
in the world,
surpassing Toyota and claiming a market cap
of nearly $183 billion before continuing its climb.
- The electric vehicle maker's stock speeding this year.
- Musk's wealth skyrocketing
thanks to a surge in Tesla shares,
making him wealthier than Warren Buffet.
- But the company's fundamentals
don't seem to explain the rise.
For example, Toyota sold almost 25 times as many
vehicles as Tesla did last year.
Instead, the rally has been driven by investor enthusiasm
for CEO Elon Musk.
In a belief by some that in the future,
cars everywhere will be powered by batteries,
not gasoline.
Here's how Tesla became the most valuable auto maker
in the world.
Tesla developed its first car in the early 2000s.
But to follow its ballooning share price,
a good place to start is last fall.
In October 2019, Tesla reported a surprise profit
for its latest quarter,
and that just sent its shares soaring.
Just a few months prior,
Tesla shares were hovering near a three year low.
The prior year, Elon Musk had tweeted
that he was going to take Tesla private at $420 a share.
And that landed him in the cross hairs of regulators.
He also kind of had a history of missing financial targets
and car delivery targets.
So that's why this surprise earning spree
was a really big deal.
Amid the rush of investor optimism,
in mid-November Musk held an event in Los Angeles
to reveal Tesla's Cybertruck.
What he did was he unveiled this pickup truck
that looked unlike any other pickup truck
we had ever seen before,
and he boasted that it was really, really durable.
At the event, a Tesla employee
threw a metal ball at the window to show its strength
but ended up breaking the glass.
- I should say also, we're going to be offering rides
in this all night.
(audience cheers)
Yeah, don't mind the glass.
(audience laughs)
- The next day, shares fell more than six percent,
but amid press around the event,
the stock quickly recovered,
and on December 23, it surged past $420.
The reason that 420 mark is kind of a milestone
is that, you know, that was kind of the tweet
that landed Musk in the cross hairs of regulators.
The SEC later said the tweet
was a reference to marijuana culture
that Musk used to amuse his girlfriend.
The shares crossing 420 later in the year,
it was kind of a victory in that sense.
In the following weeks, Tesla had a string of wins.
The company said it met its delivery goal
of 360,000 cars for the year.
And less than a year after breaking ground
at its China plant,
the car maker met its objective for Model 3 production
at the facility,
and held a press conference to celebrate deliveries
of China-made Model 3s to Chinese customers.
Many people viewed China as the world's biggest market
for electric vehicles,
so in order for Tesla to make this journey
from a small start-up to a global behemoth
producing electric cars,
Polish investors say that it needs to target that market.
So this boosted expectations for the coming year.
The investor momentum continued when on January 29,
Tesla posted a profit for the second quarter in a row.
On the earnings call,
the company said it was well on its way
to producing its next car,
the Model Y compact sport utility vehicle.
And it told investors the business should be profitable
going forward.
So this was around the time that Tesla shares
really just started to go parabolic,
and you saw Wall Street investors, Main Street investors,
kind of all piling into Tesla shares, Tesla options,
and it just kind of became this huge frenzy
around the company.
But not everyone was betting for the car company.
The fascinating thing about Tesla is that
despite its meteoric rise in the stock market this year,
it remains one of the most popular shorts,
so that means it's a really popular bet for investors
who think the shares are going to absolutely plummet.
When the stock goes up,
that's painful for a short investor.
That means that they're losing money.
So some people can't hold on
to these money-losing positions for too long,
so they have to close out their position,
and sometimes they do that by buying Tesla stock.
In this kind of unusual twist,
you have investors who think the shares are going to go down
actually helping to drive it up.
But the stock run-off was stopped short in March.
Despite investor enthusiasm,
Tesla was not immune to the market effects
of the Coronavirus lockdowns.
That month, California issued stay-at-home orders,
leading Tesla to suspend production at a factory,
and interrupting the company's ramp-up
for its newest vehicle.
The stock fell in March and then quickly bounced back
as the market started to recover.
At the heart of this downturn,
the federal reserve enacted a massive stimulus plan
to buoy the economy,
fueling a broader recovery in the stock market
that also lifted stocks like Tesla.
On April 29, Tesla reported another profit,
the third in a row.
Even through the low of the S&P 500,
the S&P was down roughly 30 percent year to date,
and meanwhile, even through that time frame,
Tesla stock was up.
So despite a recession,
a global pandemic that could crimp demand for cars,
Tesla's stock has still been resilient this year.
Then on June 10, investors pushed the auto makers' stock
past $1,000 a share for the first time ever.
After Musk told employees it was time to begin production
on the company's all electric semi-trailer truck.
By July, Tesla became the world's most valuable car maker,
overtaking Toyota,
and on the 2nd, Musk taunted the short sellers
when shares opened above $1,200 for the first time
after Tesla deliveries beat expectations
and investors anticipated the company's inclusion
in the S&P 500 Index.
In order to be considered for the S&P 500,
a company needs to deliver a cumulative profit
over four consecutive quarters,
including the most recent.
So even before Tesla's most recent earnings report,
a ton of investors were anticipating,
hey we think it's going to be profitable this quarter,
we think it's going to be in the S&P 500,
and that drove the stock even higher.
On an earnings call on July 22,
Tesla said it hit that goal,
defying the Wall Street bears who expected a loss.
- We were able to achieve
a fourth consecutive profitable quarter,
and although the automotive industry was down
about 30% year over year in the first half of the year,
we managed to grow deliveries
in the first half of the year.
- If you bought 10 shares of Tesla last June, in June 2019,
it would have cost you a little more than $1,700.
If you held on to that investment through late July,
it would have been worth more than $15,000.
Bears still say that the stock is going to go down.
They don't think that Tesla will bring electric vehicles
to the masses.