Tesla shares, on a steady rebound from the company’s wobbly first half, are ending 2019 in record territory, closing at the highest ever just ahead of the Christmas holiday and delivering an early present to Elon Musk, the electric carmaker’s biggest shareholder.
Tesla finished at $405.59 on Dec. 20, up less than 1% from a day-earlier record high of $404.04. The week marked the first time the Palo Alto, California-based company’s shares closed above $400. Musk, the company’s CEO and sole remaining cofounder, ended the day with a net worth that Forbes estimates at $26.1 billion. The bulk of that comes from his stakes in Tesla and rocket company SpaceX which, although wildly valuable, don’t change the fact that Musk is a relatively cash-poor billionaire.
The shares have moved steadily upward since Tesla surprised analysts and investors with a $143 million third-quarter profit on Oct. 23, driven by sales of Model 3 sedans and pollution credits to other automakers. From that point on, the stock has surged by 59%. Prior to the earnings news, Tesla had been down 23% for the year.
The gain appears to result from expectations of more stable operations and limited near-term competition, says JMP Securities analyst Joseph Osha, who rates Tesla “market perform.”
“It’s becoming increasingly apparent that you aren’t going to have at CES or in the first part of 2020 any fully competitive offerings from the major OEMs,” Osha tells Forbes. “The Audi e-Tron has flopped, Mercedes is late with the EQC. Even the Porsche Taycan, which is a good-looking car, debuted at a high price and at numbers, performance data, that really don’t differentiate it that much from a Model S.”
Demand for the company’s entry-level Model 3, starting at about $40,000, also appears strong and with little direct competition, he said. “I cannot believe that it is the end of 2019 and no one can field a decent mass-market premium vehicle to compete with the Model 3. It blows my mind,” Osha says.
Moving into 2020, the company is also about to start producing Model 3 sedans at its new Shanghai factory for the Chinese market, indicating big increases in overall volume and revenue, assuming it avoids early production snags there.
Another potential factor behind the stock’s strong year-end rise may be investors with long-term portfolio strategies jumping in to buy Tesla in recent weeks.
“Most people running long-only money are compared to benchmark (indices), so when you have a company that goes from $40 billion to a $70 billion market cap, that really complicates life for you,” Osha says. “The size of this company and the size of its market cap now is such that people who run industrial or auto money just kind of get dragged to the table.”
On its current trajectory, the stock may soon reach $420 per share. That’s a tricky number for Musk who ran afoul of U.S. securities regulators in 2018 for tweets claiming he’d secured funding to take Tesla private at that price point. It wasn’t true and he and the company had to pay combined SEC fines of $40 million for the claim as a result. It also cost Musk his role as Tesla board chairman.
Presumably, things will be less contentious when the stock hits $420 for real.