Tesla’s stock price keeps climbing.
Tesla’s stock price keeps hitting new record highs. The company’s shares hit $1,389.86 at market close, recording gains for the sixth straight session.
Bloomberg reported that the company is adding a whopping $14 billion a day to its market cap.
This unprecedented rise in the company’s share price is attributed to several factors.
Demand for Tesla Cars is ever-increasing.
For its Q2 output, the company declared that it has sold 90,650 vehicles and manufactured 82,000. This marked only a 5% year-over-year decline, exceeding market estimates.
Those figures are recorded at a time when the global auto market is suffering from COVID-19 related aftershocks. The pandemic caused a severe disruption in global supply chains and a collapse in demand for vehicles.
Chinese market fueling more demand for Tesla vehicles.
Tesla’s Shanghai-based Gigafactory 3 began production in 2020, and demand for Tesla cars increased exponentially in the country.
The China Passenger Car Association, Tesla sold 11,095 Model 3 vehicles produced in Gigafactory 3 in May. It also reported that Tesla sold 14,594 units of the same Model during June, up 35% month-on-month.
Promotions and Price cuts to stoke up demand.
Tesla also implemented an aggressive marketing strategy and price cuts to increase demand over the course of Q2. Forbes reported that the company cut prices on several vehicles. For instance, the Model 3 saw a price cut of $2,000, and both Model S and X prices dropped approximately $5,000.
The report also stated that Tesla offered other types of incentives such as a free year of supercharging for customers that bought the Model 3 during the month of June.
What goes up must come down?
In spite of all the latest developments, several analysts believe that Tesla’s stock is now forming a bubble that could burst in the future.
Ivan Feinseth of Tigress Financial partners stated that “Tesla’s valuation doesn’t make sense by traditional measure”.
Morgan Stanley analyst Adam Jonas reported that the company’s stock price may drop in the long run.
Jonas cited concerns about sustainable profit margins in China, and inevitable competition in EV and self-driving cars with big-tech companies, such as Amazon.
While Tesla has been on a tear lately, its stock price may indeed go down. In a capitalist society, there are no permanent bull and bear markets. What is certain, however, is that Tesla is pushing the world towards clean energy, and is implementing environmentally-friendly solutions.
Ultimately, that matters just as much as increased sales, cash flow, and profit margins, if not more.