Tesla's losses were mounting last summer, massive debt payments were looming, and both Wall Street and federal regulators had run out of patience with the erratic behavior of CEO Elon Musk.
One year ago this week, shares plunged 14% after Tesla posted another quarterly loss, this one for $408 million, wiping out about $6 billion of the company's worth.
Since then the stock has blasted off like at rocket at SpaceX, another Musk-led company. Tesla's market value today is three times that of Ford, General Motors and Fiat Chrysler, combined. A single share of Tesla now goes for $1,600, a seven-fold increase from a year ago, making it one of the most expensive publicly traded shares in the world.
“Things just turned on a dime,” said CFRA Analyst Garrett Nelson. “It's just been one positive announcement after another.”
In the past year, the electric car and solar panel maker successfully opened a factory in China, introduced the Model Y electric SUV, made debt payments and it's posted profits for three straight quarters. Musk toned down the posts on Twitter that had cost him and the company $40 million in penalties from U.S. securities regulators.
A day before the company posts quarterly results one year removed from that week in 2019, industry analysts have begun to question if Tesla is running too hot. Analysts polled by FactSet expect a $228 million net loss from April through June. Only one analyst has a 12-month stock price target above the current value.
Tesla's stock surge has enriched Musk, boosting his net worth to an estimated $73.5 billion. He passed Warren Buffett, the Sage of Omaha, on the Forbes Billionaires list. And Musk could be headed for another big payday soon under his ambitious Tesla compensation package. In total, Musk and other Tesla shareholders have made about $240 billion since March 18, the low point for the stock price this year.
With second-quarter sales of Tesla vehicles outpacing the first despite a global pandemic, shares could jump again if Tesla surprises with its fourth consecutive profitable quarter. That would likely check all the boxes and could lead to Tesla's admission into the club of corporate giants: The S&P 500 stock index.
But it may be a Cinderella story.
CFRA's Nelson says shares have outpaced Tesla's fundamental performance, and he's telling clients to sell. He placed a price target at about two-thirds the current value of shares.
In an interview, Nelson said April-to-June registrations of Tesla vehicles fell by nearly half in California, the company's biggest market. That's an indication of waning demand for its vehicles, which start at $37,990 for a base Model 3 that can easily hit $60,000 with options.
Tesla also cut the price of its long-range Model Y by $3,000, which Nelson sees as a red flag. And the company is about to engage in a bout of heavy spending with new factories going up in Germany and the U.S.
There are also market factors that have flung share prices beyond what would be considered a rational trajectory, Nelson said.
Short sellers that perceived flaws at Tesla have since been buying shares to cover massive losses as the stock price leapt, Nelson said. Short-sellers now account for only 7.5% of Tesla's outstanding stock, down from over 23% a year ago, he said.
Morgan Stanley analyst Adam Jonas has a $740 price target on Tesla, telling investors in a note that the market has given the company too much of a share of future electric vehicle and connected car revenue.
The valuation of Tesla shares has entered the orbit of Apple and Amazon, which took off after hitting $300 billion in market value like Tesla did last week, Jonas wrote. But Tesla's revenue and pretax earnings are far smaller than either tech company when they reached the $300 billion mark, he told investors.
Those who buy Tesla at around $1,500 per share have to believe that long-term U.S.-China trade relations will remain stable, older automakers will fail to make competitive electric vehicles, and big tech companies such as Google, Amazon and Apple won't be successful in developing electric vehicle systems, he wrote.
Jonas. who is uneasy about deteriorating relations between the world's two biggest economies, says traditional automakers are ready to spend over $400 billion on electric vehicles in the next five years, and he expects tech companies to enter the transportation business.
The dizzying run-up in Tesla’s stock has positioned Musk for a lucrative payday just a few months after the Palo Alto, California, company awarded him a stock package worth more than $700 million.
That marked the first windfall in an incentive-laden deal that Tesla’s board worked out two years ago to inspire Musk to build a company that eventually generates $175 billion in revenue, and is valued at $650 billion.
Tesla’s market value during the past six months has averaged $149 billion, according to data compiled Monday by FactSet Research. That’s just a $1 billion below the next hurdle that needs to be cleared for Musk to receive 1.69 million stock options valued at $350.02, or nearly 80% below Monday’s closing price of $1,643.
The huge gap would make those stock options worth $2.2 billion on paper, although Musk wouldn’t be able to sell the shares for five years.
Musk qualified for his first batch of 1.69 billion stock options in early May after Tesla’s market value averaged $100 billion for a six-month period. The company also reached revenue and adjusted earnings goals needed for Musk to receive the first of 12 potential awards that could be worth tens of billions of dollars.