What is happening to Tesla stock?

One of my friends keeps on poking me about returns he earned on his Tesla investment. What is happening to Tesla stock? It is time to buy or sell? What drives the stock in 2020?

Stock price: $2,093

  • Performance YTD: +400% (vs. S&P500 +5% vs. Apple +67% vs. Amazon 73% vs. Gold 27%, Bitcoin 45%)
  • PE: 1,079 (S&P500 is at 29 and it has been higher only 2x over the last 150 y)
  • If Tesla were in the S&P 500, it would be the 9th largest index company
  • 5 -1 stock split to take effect on August 31
  • Q2 20 net income $104 m (beating estimates)
  • Model 3 strong in China (best-selling electric car in China)
  • Battery costs decreased significantly (down to 8% from 15% of the car price)
  • Car business still operates in red zone
  • Tesla revenue from sale of emission credits increased to $428 m in Q2 (polluting car companies buying emission credits from Tesla)
  • GPM (without emission credits): 19% (with emission credits) 26%
  • Covid-19 times

  • Graph shows YTD performance of 8 largest S&P500 + Tesla.
  • Part of the performance can be explained by above points.
    Is it sufficient to explain the 400% stock price increase this year?
  • Hardly

Deni Memic

Academic Program Chair Finance at Higher Colleges of Technology - UAE