Tesla explodes on the stock market: Fast and Furious

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The market value attributed to a Tesla car is therefore 180 times higher than a GM car.

Tesla sold nearly 500,000 cars in 2020. With a market capitalization close to $ 800 billion, that works out to about $ 1,600,000 per car sold, compared to GM's $ 9,000. The market value attributed to a Tesla car is therefore 180 times higher than a GM car.

You have to know how to show great mental agility to try to justify such an unreasonable valuation. This is what Bank of America (BOFA) is trying to do in a January 11 research note, by increasing its price target on Tesla to $ 900, the current price being around $ 850.

The American broker believes that Tesla should trade at 23 x EV / Sales 1 and 118 x EV / EBITDA 2 , which is significantly higher than an automobile manufacturer such as BMW (9 x EV / EBITDA) and a technology company like Apple (28 x EV / EBITDA).

BOFA's reasoning is as follows. The increase in the stock price provides Tesla with cheap access to capital. The manufacturer recently raised $ 5 billion in September 2020 following a split operation and an additional $ 5 billion in December (BOFA is in charge of the operation).

This money that the company does not have to repay allows it to finance its growth by investing and increasing its production capacities, which should generate incremental income and profits, thereby causing an increase in the stock market multiple (the market allocating in generally a premium when earnings growth accelerates), and therefore an increase in the share price.

By means of storytelling : vision and growth, Tesla thus enjoys access to capital without meeting the same profitability requirements as its peers. Investors embrace the vision of charismatic founder Elon Musk, now the richest man in the world , believing he will revolutionize the auto industry and transform energy storage, and therefore regularly provide him with fresh money for to finance risky projects such as sending rockets into space .

A veritable virtuous circle has been set up, the origin of which is the rise in the stock market price. But be careful, because the reverse is also true. A downward spiral can just as easily fuel a vicious cycle. And after an exceptional stock market performance (+ 700% in one year), going off the road cannot be ruled out. So fasten your seat belts.

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