Tesla’s stock climbed by almost 5% on Wednesday, with a closing price of a record high $492.14 per share, raising its market capitalization to nearly $89 billion, which is $2 billion bigger than General Motors’ and Ford’s market caps combined.
General Motors’ market capitalization is currently at $50 billion, while Ford’s is at $37 billion. The sudden jump in Tesla’s market cap was caused by a surprise profit in third quarter, advancement in its Chinese factory, and significantly better car deliveries in the fourth quarter. All these raised Tesla’s stock to more than double in the past three months.
“It’s clear that Tesla is back to being a story stock and there’s a lot of good news out there,” said chief investment strategist David Kudla of MainStay Capital Management. “But there are still some problematic issues out there, chief among them is what will its sustained profitability look like, and when will it start to be valued like a car company and not a tech company.”
The progress of the Silicon Valley electric car maker made by Chief Executive Elon Musk has resisted short sellers and traders who anticipated that long-instituted car companies, like GM and Ford, would eventually overtake it.
Emphasizing the investors’ confidence both in Musk and the company’s potential growth, Tesla’s market capitalization has outdone its US rivals, despite dwarfing Tesla on the business side. GM and Ford had delivered over 2 million vehicles each in the United States alone last year, while Tesla delivered 367,500 vehicles worldwide.
While Tesla’s recent progress may mean good news to the company, analysts and investors remain pessimistic about the company’s ability to deliver profit and cash flow consistently.
In recent years, Tesla has continually missed targets and Chief Executive Musk’s mercurial behavior has been scrutinized by financial regulators and shareholders of the company.
Despite this, more and more mainstream automakers are developing new generations of electric vehicles to compete with Tesla’s combination of technology, performance, and style.
Analysts rate Tesla “sell” than “buy”, which is unusual for Wall Street companies. Thirteen analysts recommend selling Tesla shares, while eleven recommend buying and another nine remain neutral, according to data from Refinitiv.