Tesla’s market capitalization exceeded $500 billion yesterday, and the fairytale continues for its shareholders. The company is up +563.81% at yesterday’s closing levels, a whopping number for anyone interested in stock market investing.
Even more interesting – the impressive performance had come in a pandemic year when challenges exceeded all expectations. After all, this is an electric vehicle company, even though it is listed as a leading technological enterprise. However, it sells a high-end product, an expensive one, and thus not everyone can afford a Tesla.
Yet, the company capitalizes very well on two crucial dimensions. One is the CEO’s vision. Elon Musk owns a lot of shares; thus, he is viewed as having the “skin in the game.” His interests, therefore, are viewed as aligned with the company’s interests. Another one is the human race towards green policies. So big is the distance that needs to be traveled that companies like Tesla can only thrive in such an environment. Moreover, it has a competitive advantage over other companies, as it leads the industry for many years now.
Therefore, should we be surprised by the fact that Tesla is now worth more than Toyota, General Motors, Nissan, Honda, and Ford – combined? Yes and no.
New Plans for Tesla
To start with, Tesla prepares for inclusion in the S&P 500 index in the second part of December. For this reason, due to the rebalancing of passive portfolios, we may still see pressure on Tesla’s share price to rise to new highs. The passive managers that track the S&P 500 must alter their portfolios to make room to the new kid in town – Tesla.
To continue, the company has plans in areas that competitors do not even dream of competing. For instance, at a conference in Germany, Elon Musk hinted that Tesla plans to introduce improved models of existing versions, with a better range, from 700 km to 1000 km.
On the other hand, whenever such incredibly high valuations form, one cannot think of a bubble and what makes a bubble. At yesterday’s closing price, Tesla’s Elon Musk overtook Bill Gates as the world’s second-richest person. Only Jeff Bezos of Amazon has left ahead. Also, Musk added $100 billion this year alone to his wealth, more than any other person listed in the famous Bloomberg Rich list. As a comparison, at the start of the year, he ranked 35th.
Can Tesla sustain its rise? We are about to find out sooner rather than later.