Tesla Inc. shares rallied to a record high on Friday, taking the electric-vehicle maker another step closer to joining an elite group of companies with market valuations of at least $1 trillion.
The stock jumped as much as 1.8% to touch a high of $910, before closing at $909.68 in New York. That drove the Elon Musk-led automaker to briefly overtake the valuation of Facebook Inc.
The trailblazing electric-vehicle maker is up 29% this year, ahead of S&P 500 Index’s 21% advance. Meanwhile, Facebook took a heavy hit on Friday after a cautious outlook from Snapchat parent Snap Inc. weighed on the shares of ad-dependent technology companies. Facebook retreated as much as 6.1%.
After some violent gyrations in the first half of this year, Tesla shares have been on a steady climb since early June, helped by two sets of strong quarterly results that showed the company is faring much better than traditional carmakers in handling the semiconductor shortage. Deliveries and margins for the third quarter, especially, dwarfed all estimates, while margins for the period impressed bulls and bears alike on Wall Street.
“While Tesla has certainly been impacted by the semi shortage, we see several reasons explaining why Tesla volumes have been less impacted from the semi shortage than other automakers,” Credit Suisse analyst Dan Levy wrote in a note on Oct. 15. Levy explained that because Tesla writes much of its own firmware it’s better able to quickly pivot on chip supply if required.
Tesla makes two of the best selling EVs globally — the Model 3 and Model Y — despite a big push from legacy automakers to develop competitors, as well as the emergence of several new players. As EV adoption continues to grow, with strong support from policy makers, Tesla is expected to be a major beneficiary. And that is what investors are betting on.
“The latest results absolutely do not justify Tesla’s current valuation, but that was never the bullish thesis,” Matt Weller, global head of market research at Forex.com said. Traders have been buying the stock on expectations that the company will capture a dominant share of the fast-growing markets for EVs and self-driving cars years down the road, he said.
“What these results do show is that Elon Musk and company have built a profitable auto manufacturer, giving them more runway to accomplish their ultimate goal and grow into the market’s sky-high valuation,” Weller added.