Not long ago, there was worry that Tesla Inc. (NASDAQ: TSLA) was in trouble and that the problems would hit the stock price. Not so. The shares trade up 110% since the beginning of the year and are at a year-to-date high. (These are the best- and worst-built cars in America.)
First, Tesla came in slightly below estimates for cars sold last quarter. That did not matter. Tesla could still sell nearly 2 million cars this year. Except for electric vehicle (EV) companies in China, no other manufacturer is close to Tesla in the EV market, and none is likely to be for years.
Other major car companies continue to be punished by that market, primarily because there is little belief that they can get EV market share this decade. GM and Ford are also up against every other major car company worldwide, which means Tesla is not their only competition. Every one of them is chasing Tesla. GM’s shares are up 4% this year, compared to a 13% rise in the S&P 500. Ford’s stock is up 10%.
Tesla also has been criticized for lowering prices. On the one hand, that hurts margins. On the other hand, it increases unit sales. CEO Elon Musk has decided market share is the more important of the two. Over time, that decision is probably correct. Future EV sales forecasts vary substantially. At the bottom end of the estimates, only a few car companies can make money and have sharp increases in unit sales.
Moreover, Tesla has been criticized because Musk spends most of his time at troubled Twitter. That may not change either, but there is no evidence Tesla has been hurt in the process.
Perhaps Tesla’s most significant risk is problems with the self-driving feature on its cars. There have been reports of accidents in which the feature is turned on. Some reports are anecdotal, so it is too early to know if this is a financial and brand equity threat to the company.
While each of these factors plays out, if someone bought Tesla shares at the start of the year, they would have doubled their money as of today.
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