Tesla’s Stock is Soaring.

Amidst the pandemic, Tesla Stock’s growth is making headlines everyday. Why?

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By: Mei Kuo

On July 10, 2020, Tesla’s stock made history, reaching an all-time high that broke $1,000 per share. Since last year, its stock has increased 400% from a value of around $230 per share to what it is today: over $1,400 per share. This tremendous surge of growth has caught attention all over the world, inviting investors, journalists, and analysts to understand why the stock market’s spotlight has fallen on Tesla.

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Before getting into some of the reasons why Tesla’s stock is booming, it is important to understand the basics on how share price is determined. Like any markets, the stock market is a field of supply and demand. When a person sells a stock, the seller and buyer exchange money for share ownership. The price at which that stock is purchased becomes the new market price. The cycle continues, with buyers and sellers exchanging money and ownership.

Simply said, as more people demand a certain stock, the higher the price becomes due to the limited supply — which leads us to this very question:

Why are so many people demanding Tesla stocks today?

Here are three main reasons:

1) Innovation

Tesla is an electric vehicle company that strives to provide fuel-independent transportation systems. Their slogan “to accelerate the advent of sustainable transport” is paving the way for a battery-driven future. There are currently four Tesla models in existence. The company also explores other ways to utilize battery power, with solutions like solar panels and power storage. With its groundbreaking products, people are getting excited to see what the company has in store for the future.

2) Risks

In 2019, the company raised $10.7 billion of new debt whilst having $0.9 billion worth of new shares. Moody’s, an investment risk management company, states Tesla’s credit rating is at B3, a grade that implies it is at high credit risk.

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Source: https://investorpolis.com/en/abc-of-investments-what-are-bonds/

On top of that, the coronavirus has forced the company to close down temporarily at the end of March. With these threatening factors, Tesla faces a challenge to continuously innovate much to the disappointment of stakeholders

What this means is that innovation could save the company from the dire economic impacts of the coronavirus.

3) Elon Musk

Tesla’s CEO, Elon Musk, has been the center of much controversy. His eccentric tweets around many topics have caught the world’s attention. All eyes are on him and his witty mind. With the media’s portrayal of Musk, the company has gained a lot of excitement about what Musk’s future plans will be.

In the coming future, there is a chance that Tesla’s stock will top $2,000 per share and have a market value of $370 billion. There are only eight American companies that are worth more than that now, some of which includes Microsoft, Apple, Amazon, and Google. Even though there is often a lag between consumer’s intention to purchase Tesla products and the actual time of purchase, the past demands are catching up to make new numbers for the company’s sales numbers.

In a nutshell, all eyes have been on Tesla and will most likely continue to be.

Sources:

  1. https://www.fool.com/investing/2020/04/22/why-is-everyone-talking-about-tesla-stock.aspx
  2. https://www.forbes.com/sites/andyswan/2020/06/10/heres-why-tesla-stock-is-over-1000-today/#4c577a046368
  3. https://edition.cnn.com/2020/07/03/investing/tesla-stock/index.html

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