The earnings report for the April quarter comes as the residential real estate market steadies itself from the impact of the coronavirus pandemic, which slowed
Why is Tesla stock currently doing so well?
LOL, to add one more answer to the pool, I hope to be rational, albeit Mr. Market doesn’t care about being rational at times.
Mr. Market also doesn’t care about hate and fanboyism … so you can dismiss those answers.
Here’s the rational answer:
- As one poster points out, despite how I might feel, historically Mr. Market rewards innovation. Innovation does not mean first to market for an EV, Chevy gets that prize, but innovation [again, I’m talking historically], often looks like “best” to market. Tesla was the first to deliver a BEV that actually sat 4–5 full-size adults. First to take care of range anxiety with now 16,000 superchargers at 1800 charging station across the USA. I can go on but you get the point.
- Mr. Market trades at multiples of price to earnings ratio (P/E). It is absurd to suggest that a stock should only trade at “fair market value” (FMV), fair market value is how you determine an appropriate entry point. However if you wait for fair market value you may never invest! Of the 18 stocks in my portfolio only 9 are trading at or below fair value. For example, AAPL is trading at 129% of FMV and MCDat 98%.
- The market trades at a price people are willing to pay for it. Investors are willing to trade TSLA at 239% of its fair value with a P/E of 97. Investors are willing to trade MSFT at 94% of its fair value with a P/E of 30. I am currently moving towards being an Income Investor, and I attempt to only purchase stocks with a P/E below 25, its hard! TSLA most likely does have a lot of exuberant retail investors, but clearly it has a lot of savvy seasoned investors and institutions who know how to spot a risky, yet profitable growth stock. As a seasoned investor, believe me I have an exit strategy, and I am only long TSLA until it shows “real” signs of failing to innovate or late to innovate.
- Mr. Market is always looking for the next story to justify the P/E of a growth stock and or to increase it. In the absence of the next story and or innovation profit taking, short sales and or dips occur. A radical dip occurs when the growth story was all talk or the company signals no more growth; a radical dip could be a bubble, but for TSLA so far the radical dips were based largely on fear. Be patient, don’t panic, Mr. Market reacts to fear but won’t be manipulated by fear.
- There were actually three stories that moved TSLA to a higher price point in December and January. A) China gigafactory not only came on line but production date was moved up, abnormal for Musk, B) Musk hinted that the Maxwell deal would lead to a 30–50% increase in the range of new batteries, and C) Musk announced another event tied to the Maxwell battery patents plus more – battery and powertrain investor day, early 2020. I don’t consider the Germany gigafactory as “alpha” news thus not part of this run up, but it certainly contributed to investor confidence.
Disclosure: opened a new position (2.5% of my portfolio) days before the runup! Also, cash in hand to buy at the next dip/profit taking madness.