Via Financial Times

Bar chart of Tesla market capitalisation ($bn) vs Detroit rivals showing The valuation race: US carmakers

Investors have valued Tesla at more than $80bn for the first time, widening its lead over Detroit rivals and reflecting Wall Street’s improved outlook for the electric carmaker.

Shares in Tesla advanced 1.9 per cent to $451.54 on Monday. That lifted its market capitalisation to $81.4bn at the close of trading, another milestone for Tesla amid its recent run to all-time highs and nearly as much as the combined value of General Motors and Ford.

Tesla faced mounting scepticism from investors and analysts less than one year ago, as it cut its workforce, delivered fewer vehicles than expected in the first quarter of 2019 and tapped Wall Street for a $2.7bn cash raise.

Tesla has since flipped the script. It booked a surprise net profit in the third quarter and said on Friday it delivered 367,500 vehicles in 2019, hitting the company’s annual goal ahead of the expected 2020 launch of the Model Y SUV. Its growth prospects in China have also energised investors, with Tesla beginning to deliver vehicles built at its new Shanghai plant.

Tesla is now worth 59 per cent more than GM, which ended trading on Monday with a market capitalisation of $51.2bn. Ford was worth $36.3bn. Tesla’s market value briefly surpassed the $80bn threshold during trading on Friday, after quarterly sales growth beat forecasts.

Wedbush analyst Dan Ives said that “while part of this recent rally has been a massive short covering, it has also been driven by underlying fundamental improvement as the company’s ability to impressively not just talk the talk but walk the walk has been noticed by the Street.”

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He added that “optimism around the story has grown markedly from the dark days seen earlier in 2019.”

Shares, which closed at a record high for a second consecutive day on Monday, are up 155 per cent from their 52-week low of $176.99. Analysts’ average 12-month target price is $339.25, up from $266.74 in July, according to FactSet.

Line chart of Tesla share price hits record as Wall Street turns bullish ($) showing Tesla zooms higher

Short selling — a bet that a stock will fall — accounts for 15 per cent of Tesla’s shares, down from a 2019 peak of nearly 25 per cent, according to Refinitiv. In May, Tesla’s share price traded below $200 for the first time since 2016.

Although Tesla has turned a corner, CFRA analyst Garrett Nelson cautioned that first-half results in 2020 and the company’s ability to sustain profit margins remain questions.

“We point out that Tesla is already lowering prices in China and faces a flood of EV competition in the US, with at least 25 new models debuting this year (with most eligible for the full $7,500 tax credit),” Mr Nelson said.

The broader car industry also faces softer demand in the US. Shares in GM and Ford fell on Monday after the latter reported a 1.3 per cent decline in fourth-quarter US sales year-over-year. GM said last week its domestic sales for the quarter fell 6.3 per cent.

US sales of new vehicles totalled 17.1m last year, down from 17.3m in 2018.