Tesla Speeds Past Stock Market Record

Tesla entered 2020 recharged and ready to hit the road.

The electric car company’s stock price increased by 20% on February 3, 2020, making the biggest jump for Tesla in six years. The spike followed Tesla’s positive fourth-quarter earnings which were announced at the end of January, 2020. Tesla remains one of the largest players in the growing electric vehicle industry.

What happened? 

On February 3rd, when the market closed, Tesla’s stock price was at a record high of $780 a share, according to Forbes. The 20% jump marked Tesla’s biggest bump up since May 9, 2013. Tesla’s stock price has increased 120% since the beginning of February, 2019. The price continued to increase on February 4th, 2020 to $887 by the end of day. 

In response to the rally, some analysts have suggested Tesla’s stock price could hit $7,000 by 2024, according to Barron’s.

Tesla stock has been publicly traded on an exchange called the Nasdaq since 2010.

Why the jump?

One reason for the price spike could be Tesla’s better-than-anticipated earnings for the fourth quarter of 2019. Tesla reported $7.4 billion in revenue for the fourth quarter of 2019, a 17% increase compared to the third quarter of 2019. Tesla also announced a net income, or profit, of $105 million for the fourth quarter.

Production of Tesla’s Model Y, the latest SUV from Tesla, is also reportedly ahead of schedule. Tesla’s factory in Freemont, California, is expected to be done building the new car by April 2020. The Model Y is expected to be a little cheaper than the previous SUV from Tesla, the Model X.

Tesla delivered 367,500 cars in 2019. The number of cars delivered increased by 19% between 2018 and 2019 and Tesla plans to deliver 500,000 cars in 2020.

Another reason for the jump could be a practice called short selling, according to the Wall Street Journal. When investors short a stock, they hope to profit from the falling value of its share price. Investors who short sell are betting against a company’s stock. In this case, Tesla’s stock has risen, so short shellers may have to buy Tesla stock to prevent further losses in their positions, according to some reports. That has driven the stock price up even further.

More about Tesla and Elon Musk

Tesla’s recent success comes more than a year after the Securities and Exchanges Commission fined Elon Musk $20 million in September 2018. The SEC also forced Musk to step down as chairman of Tesla after he tweeted that he would take Tesla private. The SEC said the tweet was false and misled investors. 

Musk, who has remained the CEO of Tesla, is considered one of Silicon Valley’s most brilliant and innovative entrepreneurs. In addition to co-founding the payments company Paypal, he also founded the space exploration and transportation company SpaceX.

The rise of electric cars

Electric cars, which operate on batteries that can be recharged at charging stations, are increasingly affordable and popular. To compete with Tesla, U.S. car companies including Ford, General Motors, and Fiat Chrysler, have announced plans to develop their electric car businesses.

The automotive industry still has a long way to go to become less dependent on gas. While sales of electric cars increased by 81% in 2018, there were still only 1 million electric cars on the road. Nearly half of all car sales in the U.S. in 2018 were reportedly for SUVs.

Investing in the planet

Still, climate change is an increasingly important topic for businesses such as Tesla and other car manufacturers. Stash offers ETFs that include clean energy companies and companies that are working to reduce their carbon footprints.

When you invest, remember to follow the Stash Way, which includes regular investing, diversification, and planning for the long term.