Tesla (NASDAQ: TSLA) released its Q4 earnings last night, taking nearly everyone – save for the most ardent Tesla bull – by surprise. Earnings per share (EPS) and sales revenue blew away analyst estimates, providing further proof to TSLA shareholders that the electric-vehicle (EV) manufacturer is the “real deal.”
It’s the second quarter in a row that Elon Musk & Co. have surpassed expectations. This time around, Tesla reported an EPS of $2.14 (vs. $1.77 expected) and $7.4 billion in sales (vs. $7 billion expected).
As a result, TSLA soared this morning after gaining 6.8% in pre-market trading. Shares were up 10% on the day just minutes after the market opened.
If those gains stick, the stock will have achieved $600 with ease – a price level many analysts considered impossible just a few months ago.
But now, it’s a reality. TSLA shares are trading well above the $420 price target Musk identified in his “funding secured” tweet from August 2018, in which he considered “taking Tesla private.” At the time, the stock was only worth $343.
Since then, it’s almost doubled.
The journey to $640 (TSLA’s current price per share) wasn’t without its struggles, however. In May of 2019, shareholders had to endure a drop to a three-year low of $176.99 after several quarters of poor earnings.
Shortly after the collapse, analysts piled on, gouging the stock with valuations in the $50-$60 range. From their point of view, Tesla didn’t deserve to be in the same conversation as the major automakers.
After last quarter’s surge, though, the EV-maker’s market value sits higher than Ford ($34.71 billion), General Motors ($47.36 billion), and even Volkswagen ($80 billion) – all of which do far more business than Tesla, which boasts a total market capitalization of $116 billion.
Only Toyota Motor Corp ($229.96 billion) is worth more.
Some analysts were quick to point out that Tesla, from a purely fundamental standpoint, isn’t at all deserving of its inflated market value. It’s a “cult of personality,” they argued, full of “religious investors” that are buying the hype (and probably the cars, too).
But now that Tesla’s beating quarterly estimates – something the company struggled with for years – shareholders are being rewarded for their loyalty. The stock’s current value doesn’t just represent what Tesla is, but what it will be in the future.
Speculators have already priced-in nearly a decade’s worth of Model 3 sales. That’s what’s sending traditional analysts into a frenzy, while TSLA bulls laugh all the way to the bank.
Shareholders (primarily, their portfolios) have gotten fat on the fruit of Musk’s labor over the last three months. During last night’s earnings call, he threw them another “bone,” claiming that retail investors have “deeper and more accurate insights than many of the larger institutional investors and analysts.”
Of course, Musk’s right. Many prolific “experts” ate copious amounts of crow this morning after Tesla breached $600 per share.
But Bank of America – one of the world’s top financial institutions – refuses to budge from its bearish stance. Company analysts maintain an “underperform” rating for TSLA, with a price target of $350.
Will they be proven correct in the long-run? Maybe, maybe not.
Regardless of what happens, Tesla disciples have made a killing on one of the market’s hottest (if not the hottest) stocks. In many ways, they’ve already “won” the EV war of bulls and bears.
And if Musk can keep his company rolling, they’ll watch their account balances push even higher.
Provided, of course, that shareholders decide to eventually take profits and sell for a gain. If today’s rise is any indication, though, that won’t happen any time soon.
Not until Tesla takes over the world – a foregone conclusion to plenty of young investors, and something worth betting their (potentially early) retirements on.