The relentless rally in Tesla Inc. shares has driven its valuation close to the consumer product behemoth Procter & Gamble Co. as investors bet on the electric vehicle maker’s ability to dominate the automotive market of the future.
The stock jumped as much as 8.9 per cent to a record intraday high of US$1,796.98 in New York on Monday, despite reports of a drop in the registrations of Chinese-made Tesla cars in July. China is a key market for Tesla, and the company is ramping up production there after starting deliveries from its massive Shanghai plant around the beginning of the year.
Tesla shares are now up 327 per cent this year, fueled by growing anticipation that the company will be included in the S&P 500 Index. The carmaker’s plan to split its stock into a 5-for-1 exchange to make shares more accessible for individual investors is also expected to drive up demand. Tesla was the eighth most popular stock on the Robinhood app on Monday, according to data from Robintrack.net.
Meanwhile, Wall Street has warmed to the stock, as evidenced by a steady stream of upgrades and price target boosts. The latest came from Wedbush analyst Daniel Ives, who raised his target to US$1,900 from US$1,800, saying Tesla has seen strong demand in Europe and China so far in the third quarter, with the U.S. market remaining softer.
“The China growth story is worth at least US$400 per share in a bull case to Tesla as this electric vehicle penetration is set to ramp significantly over the next 12 to 18 months,” Ives wrote. He kept his bull-case target at US$2,500.
Tesla’s market value is hovering around US$333.7 billion, just shy of P&G’s US$336.6 billion, which places the maker of Pampers and Crest as the 11th biggest stock on the S&P 500, according to Bloomberg data. Retail giant Walmart has the 10th biggest valuation on the index, at US$384.3 billion.