$TSLA Stock Update for 2020-09-08

 

Financials:

  • Market return: 14% Month, 76% Quarter, 156% Half year, 612% Year
  • EPClub ARR: 103%
  • Recommend: 3
  • PEG: 849
  • EPS next 5Y: n/a

 

Summary:

  • Hold
  • 8/31 5-for-1 stock split
  • Shares fell about 15% in pre-market trading on Tuesday after the company wasn’t added to the S&P 500 index
  • Massive stock gain this year in part driven by massive bets on high-flying technology shares by SoftBank Group Corp. and others using equity derivatives
  • $5 billion stock sale that Tesla announced last week will help pay for its spending plans, which include new factories in Germany and Texas

 

Notes:

  • Tesla shares fell about 15% in pre-market trading on Tuesday after the company wasn’t added to the S&P 500 index. The news that General Motors Co. has taken a $2 billion equity stake in Tesla rival Nikola Corp. won’t have helped.
  • We have at least a partial explanation for why Tesla Inc.’s stock gained 500% this year: Massive bets on high-flying technology shares by SoftBank Group Corp. and others using equity derivatives. The extraordinary rise valued Elon Musk’s electric car business at $464 billion at the peak in late August, when only six U.S. companies were worth more.
  • Friday both The Wall Street Journal and the Financial Times reported that SoftBank (ticker: 9984.Japan) in recent months has invested billions of dollars in U.S. equity call options in a move that seems to have contributed to the recent rally in technology shares—and may be adding to volatility in the selloff of the past few sessions.
  • It’s certainly plausible that speculative purchases of call options — which give investors the right to buy a stock for specified price — by a much larger cohort of retail and other investors played a part in the rally.
  • When brokers sell short-dated call options they often need to hedge their exposure by buying the underlying stock. You can see how a cycle of rising prices might then become self-perpetuating.
  • Call-option buying has been buoyant lately and volumes in Tesla stock trading have been astounding — almost $65 billion of its shares changed hands on just one day in mid-July, according to Bloomberg data. – Tesla’s recent five-for-one stock split seemed purpose-built to encourage more buying by making the nominal cost of the shares cheaper. The shares gained about 80% following the announcement in early August.
  • The $5 billion stock sale that Tesla announced last week will help pay for its spending plans, which include new factories in Germany and Texas, and provides a safety net in case of any financial mishaps. The company’s inflated valuation means issuing all those shares will barely dilute shareholders.
  • The current $390 billion market capitalization — four times that of Volkswagen AG, the world’s largest carmaker — is still impossible to justify with any normal metric. Most analysts are bullish on large tech companies but they’re tepid on Tesla. The average price target implies the shares will fall more than 30%.
  • EV markets continue to grab the headlines this week as Tesla competitor Nikola (NASDAQ:NKLA) announced that it had teamed up with GM (NYSE:GM) to produce its much-hyped Badger pickup truck.
  • The deal with GM could be an absolute gamechanger for the up-and-coming car maker, as it looks to take on – Tesla’s cybertruck. Nikola will not just gain access to GMs decades of engineering, car-making experience, and validated parts, it will also use General Motors’ latest Ultium battery technology and a multi-billion-dollar fuel cell program.
  • While most eyes are on Nikola’s badger truck, GM will also supply the company with fuel cells for its Class 7 and Class 8 semi-trucks. Newcomer Nikola is betting heavily on hydrogen technology, while most of its major competitors in the truck-making industry such as Daimler, Freightliner, Tesla, and Volvo are looking to develop all-electric trucks.
  • Nikola aims to roll out its class 8 fuel-cell/electric semi-truck in 2023, while the Badger pickup truck should go in production in 2022.
  • Tesla Inc shed about $80 billion of its market value on Tuesday, an amount that overshadows the combined value of General Motors Co and Ford Motor Co, after its surprise exclusion from the S&P 500 index.
  • Wall Street analysts and investors widely expected Tesla to join the S&P 500 after the company posted its fourth consecutive profitable quarter in July, clearing a major hurdle for its potential inclusion in the benchmark stock index.
  • In a surprise announcement, the S&P Dow Jones Indices decided to add online craft seller Etsy Inc, semiconductor equipment maker Teradyne Inc and pharmaceutical technology company Catalent Inc to the S&P 500 instead.

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