Tesla surges to become the biggest auto-maker in the world

Mike Zaccardi, CFA, CMT

Tesla is on the move. It’s $1,200 per share as I write. Elon Musk’s baby is now bigger than Toyota, making it the most richly-valued auto-maker in the world. Some may say Tesla is more of a technology stock versus a consumer discretionary car company – maybe they have a point. Perhaps Tesla has benefitted from the broader movement to large-cap growth stocks this year.

But Tesla has been a wild ride. Would you believe that just a year ago it was under $200 per share? Now it’s near $1200. Who knows – by the time you are reading this, maybe it is $1,500 per share .. or $500. The stock rallied to nearly $1,000 in early 2020 before falling fast to $350 at the March lows (when everything was being sold). Since the March nadir, TSLA has gone up three-fold.

Always a fun exercise on Finance-Twitter – what is Tesla bigger than? Would you believe Tesla is valued more than the following: Pfizer (who may have the cure for COVID! Hopefully), Coca-Cola, Bank of America, Disney, and Exxon Mobile! Next on the chopping block could be AT&T and Netflix (actually is just crossed above those two behemoths – not kidding).

So what’s happening here and why does this make a difference for utilities? Turning away from the sexy charts, Tesla produces electric vehicles. EVs are growling like a weed – particularly in Europe.

And how does COVID-19 affect the market? Will urban areas in Asia and Europe look to use more EVs since public transportation may be an ‘at-risk’ activity if Coronavirus indeed stays with us for the foreseeable future? This could be a bullish narrative for Elon’s Tesla. Maybe that narrative has helped propel the stock to a $220 billion valuation.

There are just so few other ways to play the EV movement. Tesla commands about 60% of the US market share for EVs, mainly from the famed Model 3 according to BNEF data. It was the expectation that other auto-makers would enter the space and grab some share, but that really hasn’t happened to a significant extent.

A surge in EV sales in the coming years will have vast implications on the US power grid and the profile of energy usage during the day. It would likely mean EV owners charge their car during the night, driving up power demand during the off-peak period. Other things for utility risk managers to consider is what areas of the country may be hot spots for EV usage? What companies will offer charging stations as a perk?

The game is changing – the environment will shift quicker than you think.

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Chart used with permission from Tradingview.com