Tesla At $2000 Per Share? Easy!

The insane growth of Tesla's (NASDAQ:TSLA)’s market capitalization has been one of the most hyped topics for the past few days.  The shares of the newly-made auto giant renewed their all-time highs, testing the $ 1790 mark. As of this writing, the shares have pulled back to the $ 1,500 area, however, the potential for further bullish rally preserves.

Back in early June, Tesla was selling at $ 800 per share, today it costs 87% more. At the beginning of June, the company's capitalization was about $ 140 billion, today Elon Musk can rightfully say that his company has become more expensive than Toyota in just a month, reaching a $ 277.5 billion market cap.

Let us recall that Tesla (formerly Tesla Motors is an American company that manufactures electric vehicles. The company was founded in July 2003 by Martin Eberhard and Marc Tarpenning, but the company itself considers Elon Musk to be its creator. It was he who invested $ 70 million, after selling his share in PayPal. In June 2010, the company went public (IPO). For 9 years Tesla has shown a net annual loss. The largest losses occurred in 2017 and amounted to $ 2.24 billion. Despite all of this, the company's valuation continued to grow reaching $ 65 billion in 2018. As we’ve mentioned above, Tesla’s is now valued at $ 277.5, that is, 4.26 times higher than in 2018. Just imagine, owning shares of this electrical vehicle maker, you could have earned 420% profit in just 2.5 years.

After unsuccessful 2017, Tesla successfully launched its Model 3 in 2018, which became the best-selling car in the United States in terms of revenue. But even then, the company’s losses amounted to about $ 976 million. The situation did not change in 2019: at the end of the financial year, Tesla lost $ 862 million. Thus, for the period from 2010 to 2019, the company never made a profit. In the 1st quarter of 2020, the company's revenue amounted to $ 5.985 billion, and its net profit was $ 16 million. So, what has been the main driver for Tesla’s recent growth, especially taking into account quite modest results in the 1st quarter?

It's all about forecasts. In early July, Tesla reported on the number of cars produced and sold in the second quarter of fiscal 2020. In just three months from April to June, the company delivered about 90,650 cars to customers, which is significantly higher than most analysts' expectations - Wall Street forecasted delivery number at 72,000. With more than 90,000 vehicles shipped in the second quarter, Tesla surpassed the previous record quarter (88,400 deliveries). One can argue that the result of the second quarter is lower than a year ago (about 100 thousand delivered cars), why all the success?

It is very important to understand in what conditions Tesla continues to deliver its cars today. When the entire world fell victim to the coronavirus pandemic, despite the collapse in consumer activity, Tesla managed to exceed delivery forecasts by almost 30%. It's so phenomenal that it's hard to believe. This is a solid achievement, especially against the backdrop of the catastrophic decline faced by other manufacturers. For example, Audi sales fell by 30% in the second quarter.

Tesla will publish a detailed report on the second-quarter results on July 22,  so we’ll be able to assess the updated financial indicators of the company. This year Tesla plans to produce more than 500 thousand cars. For the first time in 10 years, the electric vehicle maker has a very good chance of making a profit this year. Tesla has had only seven profitable quarters in its entire history, but the manufacturer has never recorded an annual profit. If it happens this time, we will definitely see new highs.