The world's biggest car company by market capitalisation: Why is Tesla worth $200bn

On June 30, Tesla shares closed at $1,079.81 per share, up 6.98%.

Shares in the Us electric car maker Tesla have hit another record high.

As of July 1 (LOCAL time), Tesla shares closed at $1,119.63 per share, up 3.69%, and its market value reached a new high of $207.6 billion, making it the world's largest car manufacturer by market capitalization.

The day before, Tesla shares closed at $1,079.81, up 6.98% and topping $200 billion for the first time.

Looking back 10 years to June 29, 2010, Tesla's initial public offering was priced at $17 per share. Tesla's stock has risen 64.9 times in that decade, including a gain of nearly 180% since the end of last year alone.

How can Tesla be worth $200bn when it is only 17 years old, has fewer annual sales than Toyota and has yet to make an annual profit?

Behind soaring stock prices: better-than-expected results

On a basic level, The surge in Tesla's stock price could be related to the company's third straight quarter of earnings and better-than-expected sales.

Tesla CEO Elon Musk said in an email on June 29 that the company is still on track to break even in the second quarter. Investors and Wall Street had expected Tesla to post a big loss in the second quarter.

On October 24, 2019, Tesla's third quarter financial report showed that the net profit attributable to shareholders was $143 million, which successfully turned a profit, and the gross profit margin of the auto business also returned to growth. In addition, Tesla said at the time that the Shanghai gigafactory was about to open, and that the European gigafactory site had already started in 2021.

Tesla shares jumped 17.67 percent to $300 on the news.

Tesla has had good news ever since. When the Cybertruck was launched in November 2019, Tesla CEO Elon Musk announced that more than 200,000 people had paid deposits, sending the stock up to $336.

On Jan. 7, 2020, the shares of Shanghai Gigafacorp were officially delivered to the public. On that day, the stock rose 1.93 percent to close at $451.54.

On January 29, 2020, Tesla released its financial report for the fourth quarter of 2019. The company's revenue for the quarter was 7.38 billion US dollars, with a year-on-year growth of 2%. Net income attributable to common shareholders was $105 million and free cash flow was $1.01 billion, both above Wall Street's expectations for Tesla. For the full year of 2019, Tesla's revenue was $24.578 billion, up more than $4 billion from $214.6 a year earlier. Full-year net loss narrowed to $862 million from $976 million a year earlier. In terms of sales, Tesla delivered a total of 367,500 vehicles in the whole year, up 50% from the same period last year. In addition, Tesla's cost efficiency has improved significantly. In the fourth quarter of last year, revenue per vehicle rose about 19% compared with the previous quarter, even though revenue per vehicle was up only 3%, according to tesla's results review.

Tesla shares rose 11.62% in after-hours trading to hit an all-time high and broke the $600 mark for the first time, reaching $648.50.

The shares rose 10.3 percent, 1.5 percent, 19.9 percent and 13.7 percent in the days that followed, hitting an all-time high of $968.99 in intraday trading on Feb. 4.

At the time, Reuters noted that Tesla's earnings for the fourth quarter of 2019 marked a new milestone in its ability to compete with well-known heavyweights like GENERAL Motors And BMW.

According to Futuo Securities, the surge in Tesla's share price is based on two factors. First, the global new energy vehicle industry is accelerating. The cooperation between Tesla and Ningde Times indicates that the industrial development will be accelerated, the cost will be greatly reduced, and the demand will be continuously stimulated. At present, the market share of pure electric new energy vehicles in the world is only about 2%-3%.

On April 29, Tesla released its financial report for the first quarter of 2020. The company's total revenue for the first quarter was $5.99 billion, higher than the market expectation of $5.9 billion and up more than 30% from $4.541 billion in the same period of last year. Under GENERAL accounting rules, Tesla reported net income of $16m, or $1.24 a share, compared with consensus expectations of a loss of 36 cents a share and its third consecutive quarterly profit.

On the same day, Tesla shares rose as much as 8.72% to $870.32 in after-hours trading before closing at $800.51, up 4.08%.

It's worth noting that Tesla's sales also exceeded expectations. Tesla has forecast it will deliver more than 500,000 vehicles by 2020, a third more than last year. Tesla delivered 88,400 vehicles globally in the first quarter, beating Wall Street expectations of 80,000. First-quarter production reached 103,000, a record. The Shanghai plant is operating better than expected, with capacity expected to rise to 4,000 vehicles a week and 200,000 vehicles a year in the middle of the year. Tesla sold 11,095 Model 3s in China in May, up 205 per cent month-on-month, according to the Federation of Passenger Associations.

Tesla shares jumped 8.97% on June 10 to close at $1025.05 per share after the Federation of Automobile Manufacturers released the sales data of Tesla in China. The market value of Tesla reached $190.1 billion, making Tesla the world's most valuable auto company, surpassing Toyota for the first time.

On June 29, According to Electreck, an overseas news website, Musk claimed in an email to employees that Tesla is still expected to break even in the second quarter due to the coVID-19 outbreak. That's a big surprise, given that Wall Street now estimates Tesla lost $1.45 a share in the quarter.

If Mr Musk is right, Tesla will make its first annual profit.

Affected by this news, Tesla's stock continued to climb in the past two days. On June 30, tesla's stock closed at $1,079.81 per share, up 6.98%, and its market value reached $2.02 billion. On July 1, the stock closed at $1,119.63, up 3.69%, giving it a market value of $207.6 billion.

The future may still have room to rise

Will Tesla's stock continue to rise? Bulls are legion.

According to a January 31 report from Investment manager Ark Invest, Tesla shares could reach $7,000 by 2024, as the company is bullish on tesla's self-driving technology.

Dutch global Asset Management company (Aegon Asset Management), a former chief executive Gary Black (Gary Black) had said in January this year, as the electric vehicle market share from about 3% to 25%, tesla's market share from 2% to 10%, tesla may profit from Wall Street predicted growth this year's $1.4 billion in 2024 to $15 billion. Based on that $15 billion in earnings, tesla would be valued at $360 billion, or about $2,000 a share, assuming a price-earnings multiple of 25 times.

Tesla widening shareholders, billionaire, the legendary investor Ron barron (Ron Baron) on June 9, pick a CNBC interview, tesla's share price may be up to $3000 over five years, the future price will eventually rose to the current share price is 10 times, they will not sell any tesla shares, and hope to have more money to buy more shares.

Daniel Ives, an analyst at Wedbush, said in June that China's huge demand for electric cars was a bright light for Tesla in a dark global market, with the Shanghai plant seemingly on track to deliver 100,000 vehicles for the full year. Ives raised his price target on Tesla to $1,000 from $800.

Jefferies & Co, a leading Wall Street investment bank, said in a report on June 18 that Tesla has a leading edge in battery technology, range and business model, and that the COVID-19 epidemic will accelerate Tesla's expansion and open up the gap with other auto companies. The bank raised its benchmark price target for Tesla to $1,200 from $650, with a target of $1,400 in an optimistic scenario.

Fang Yinliang, partner of Roland Berger and vice President of Greater China, said in an interview with Thepaper.cn that tesla, as a pioneer in the field of electric vehicles, has great imagination and development space in the future in the context of the inevitable obsoletization of gasoline vehicles and the mainstream of pure electric vehicles. At present, Tesla has proved itself to have sustainable development ability in terms of sales volume, cash flow and profitability.

However, there are also different opinions. Adam Jonas, a prominent Analyst at Morgan Stanley, wrote in a June 23 note to clients that Tesla's share price above $1,000 May be a sign that the market has forgotten the difficulties of running a car company, and investors risk a sharp correction ahead.

Adam Jonas said he understands "the appeal of the Tesla story" and its high-growth potential in the future, but it's still hard to see the rationale for Tesla's high stock price over the next decade. As a result, Adam Jonas has a price target of just $650 on Tesla's stock and rates it "underweight."

Duplicate Drive: How did Tesla get there

It's worth noting that Musk didn't actually start Tesla, the company he's so closely associated with today.

Tesla was founded by Martin Eberhard and Marc Tarpenning in Silicon Valley on July 1, 2003. The name Tesla comes from the famous physicist NikolaTesla.

According to Tech Crunch, in February 2004, Elon Musk led Tesla's $7.5 million A round of financing before becoming the company's largest shareholder and chairman. In February 2005, Musk injected another $13 million into Tesla. In 2007, Musk again participated in tesla's $40 million C-round financing.

Four years into its existence, Tesla has not released a mass-produced model, hence the name "PPT build car". Tesla didn't officially become a car company until July 19, 2007, when the first mass-produced Roadster was officially launched. On February 1, 2008, the first Roadster was delivered to the owner, Musk.

Musk became CEO of Tesla in October 2008, ushering in the Musk era. So far, Musk has invested $70 million in Tesla.

In November 2008, Tesla's financial situation deteriorated and the company was on the verge of bankruptcy and had to raise $40 million in convertible bonds. On May 19, 2009, Daimler acquired a 10% stake in Tesla for $50 million. In June of that year, Tesla received a $465 million loan from the U.S. Department of Energy, which was repaid nine years earlier in May 2013. At this point, Tesla really through the operating crisis.

On June 29, 2010, Tesla raised about $226 million in its initial public offering of stock priced at $17 per share. Tesla shares surged about 41% on their debut to close at $23.89 a share.

On June 22, 2012, The Model S was successfully launched and sold, which finally ushered in another important development node of Tesla. At this time, it had been nearly 4 years since the first launch of Model S.

With the delivery of the Model S, a lot of money has been consumed, and Tesla's business is in crisis again.

According to the Guardian, the most difficult time for Tesla in 2013 was when it had enough cash to run the company for only two weeks. So Mr Musk turned to Larry Page, founder of Google, proposing that Google buy tesla for $6bn and invest another $5bn in factory expansion. Clearly, the deal did not work out. Mr Musk has instead secured loans from Banks by pledging equity stakes in Tesla and SpaceX. Foreign media reported that as of February this year, Musk owed bank loans of $548 million, a sign of musk's investment.

Mr Musk's investment was not wasted. Sales of the Model S rose significantly in 2013, and Tesla's business turned around again. On May 8, 2013, Tesla announced its first ever quarterly profit of $11 million on revenue of $562 million, beating market expectations. Tesla shares rose more than 13% in after-hours trading.

Tesla's profitability has not kept up, with only seven quarters of profitability after more than a decade on the market. As recently as last year, Tesla faced huge losses.

On April 25, 2019, Tesla released its first quarter financial report, with revenue of $4.54 billion, a significant decrease from the previous quarter's revenue of $7.23 billion, and a net loss of $702 million. Vehicle deliveries also fell 31% in the first quarter from the fourth quarter.

Amid all the bad news about revenue and delivery, Tesla's stock fell from $247.60 on April 25 to $178.97 on June 3, nearly double the $347 it had traded at the start of the year. In May 2019, Morgan Stanley analyst Adam Jonas said he might cut his tesla stock price estimate to $10 from $97.

Since then, Tesla has unveiled financing plans and plans for the Chinese market, and lowered the prices of Model S and Model X three times in a row to boost sales. Thanks to tesla's efforts, its share price has gradually begun to rise back to around $260.

On July 25, 2019, Tesla's second quarter financial report showed that its revenue increased significantly from the first quarter but still fell short of market expectations. The company's stock price plunged 13.61% to $228.82 at the close of trading, with a maximum decline of 14.73%, marking the fourth-largest one-day decline since it went public in 2010.

Since then, Tesla shares have hovered around $230 before its third-quarter 2019 earnings release on Oct. 24. Since then, as the company's performance has turned around, Tesla's share price has steadily risen.

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