Tesla Shares Rose 33% in July

Tesla Inc. (NASDAQ: TSLA) stock continued its extraordinary run in July as the share price rose 33%. That capped a 242% jump for the year so far. The figure is all the more extraordinary because the pandemic has eroded Tesla’s sales.

In the second quarter, Tesla’s automotive revenue fell 4% from the same period last year to $5.2 billion. Total revenue for the company, at $6.0 billion, was 5% lower. Adjusted earnings before interest, taxes, depreciation and amortization, a measure frequently used by analysts, rose 111% to $1.2 billion, which was better than expected.

Tesla produced 82,272 vehicles, which was down a disappointing 5%. Deliveries were off 5% as well, to 90,891.

So, with mediocre earnings, how can Tesla sport of market cap of $267 billion, which is more than Verizon or Netflix? The answer seems to be that Tesla continues to hold the pole position in the race for dominance in the electric car industry, which is expected to quickly replace much of the global gas-powered passenger car market worldwide over the next decade. Just the three global market leaders in gas-powered sales, Volkswagen, Toyota and General Motors, sold over 25 million vehicles last year.

Tesla’s success over time rests on the probable lack of success by the world’s major manufacturers to produce their own electric-powered cars, both quickly and in styles that will draw millions of customers. Almost every one of these manufacturers has electric car plans. They have large dealer networks, production facilities and marketing budgets as well. Tesla’s ongoing success depends to some real extent on their failures. Tesla’s stock price rests on the presumption its rivals have little chance to replicate what it has done over the past five years.

The potential that Tesla’s run could be reversed depends on the simple premise that another car company could offer a product as strong and begin to sell that product in large numbers.