In the last months Tesla’s stock price and – as a consequence – market capitalization have increased continuously, with the latter even surpassing that of Ford Motor Company and chasing that of General Motors Company, the two largest car producers in the United States.
One possible explanation for the company’s recent surge could be that short sellers (traders who had bet against Tesla) are finally throwing in the towel and converting themselves into buyers.
Even though this could make sense, as Tesla is one of the most heavily shorted stocks on Wall Street, analysts have also noticed that the automaker firm’s fundamentals have not changed substantially since late last year.
The remaining short sellers insist on saying that the company has proved its inability to make money in more than a decade of existence, one possible explanation being Musk’s refusal to consolidate the business, preferring to push forward and, for example, buy the struggling, debt-laden SolarCity for over $2 billion.
Always in the founder’s opinion, Tesla is expected to be delivering 500,000 vehicles by 2018, a fivefold increase over projected 2017 production, and 1 million cars by 2020, which would require the company to either double the capacity of its only factory or build a new plant.
Viewed in this context, Tesla, Inc. trading over $300 is quite absurd: even selling 1 million vehicles by 2020, most of them would be small cars, leaving the most profitable market segments – big SUVs and large pickup trucks – owned by the three Detroit automakers (General Motors, Ford, Fiat Chrysler Automobiles).
Moreover, Tesla had a loss of $300 million in the last quarter, while GM made over $2.6 billion; Musk justified this, as many other times in the past, saying that his company’s current stock price reflects the great expectations for the future revenues and net incomes.
However, the firm’s stunning increase in market capitalization has brought to mind the exaggerated optimism of the boom in internet companies that ended in disaster in early 2000, with the burst of the infamous dot-com bubble.
Unfortunately, the electric car producer is many times bigger than the companies that disappeared after that crash.
At this point, a Tesla bubble looks obvious, but now the real question is another: when will this bubble burst?