If we have to pick one auto stock that has emerged as the biggest winner for its investors in the past decade, it has to be electric vehicle pioneer Tesla TSLA. Since its IPO in 2010, Tesla has skyrocketed 1,683%, breezing past the S&P 500’s 199% total return during the decade.
Tesla: The Auto Stock of the Decade
Over the years, Tesla has shifted from developing niche products for affluent buyers to making more affordable electric vehicles for the masses. The firm has also made inroads into solar and energy storage business. Along with green energy firms, Tesla received support from government subsidies to promote alternative fuels. In 2010, the company purchased a plant in Fremont from Toyota Motors to produce Model S and other vehicles. Tesla’s Model S sedan, launched in 2012, was a breakthrough electric car, which sent the shares of the company on a tear. Deliveries of Model X, a pricey crossover, commenced in 2015but it was the Model 3, which was rolled out in 2017 and marketed as an affordable alternative to its luxury Model X and Model S, which became the most popular Tesla car and one of the best-selling vehicles.
While the past decade has not been all smooth for the company— thanks to financial troubles at SolarCity, Tesla’s Autopilot crash, battery back fires, safety violations at Fremont, management turnover, SEC litigation and many other issues— it has managed to garner the reputation of a gold standard over the years. As 2020 draws closer, the firm is set to enter the New Year as a far bigger entity that what it started off since its IPO in 2010.
Lately, Tesla has taken the financial markets by storm and the rally in its stock price does not seem to stop. During the trading session on Dec 23, 2019, the company crossed the $420 mark. The $420 level was a price that Tesla’s CEO and founder, Elon Musk, had claimed he would take the company private at, and critics laughed. That infamous tweet last year had forced him to step down as the company’s chairman and pay $20 million fine as a settlement with the Securities and Exchange Commission. As Tesla crossed Musk’s target of $420 on Monday, the charismatic CEO took to Twitter again to acknowledge the rally “Whoa … the stock is so high lol.”
Now, with Tesla soaring to record highs, closing at $425.25 as of Dec 24, 2019, Musk seems to have a sweet revenge. Powered by investors’ faith in Musk’s vision, Tesla’s market cap is currently more than $76 billion, ahead of the Detroit 3— General Motors GM, Ford F and Fiat Chrysler FCAU.
Tesla on Fire Over the Past 3 Months
Over the past three months, Tesla’s rally has been breathtaking, with its share price appreciating a whopping 76%. So, what’s behind this bullishness? Well, the company’s surprise profit in the last reported quarter really boosted investors’ optimism surrounding the stock. Rising deliveries of Model 3 have been driving the stock. Also, progress at the company’s Shanghai Gigafactory, wherein production is ramping up, is a positive catalyst for Tesla. Recently, the firm also secured a 10-billion-yuan ($1.4 billion), five-year loan from a group of China banks in order to expand production at its Shanghai factory. A phase-one trade deal between the United States and Chinawould also boost its operations in the country. Musk also revealed plans for a fourth Gigafactory in Berlin, which will help Tesla avoid any export complications moving its cars to Europe. Plus, the company recently unveiled two new vehicle models, the crossover SUV Model Y and Cybertruck.
The Road Ahead Only Seems Brighter
Impressive sales of existing products, aggressive expansion efforts that will allow the company to manufacture and sell autos and batteries in Europe and Asia, and exciting future products have made Tesla one of the red hot stocks of the decade.
The company is finally meeting management’s highly ambitious goals. Considering the tailwinds, the Zacks Rank #2 (Buy) stock still has plenty of upside potential left. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tesla is a robust long-term investment based on its market leadership, progressively broadening global operations and new product developments that are going to take the company to new heights in the coming decade. It appears that other aspirants in the auto market are going to have to keep chasing Tesla in the foreseeable future.
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Click to get this free report Ford Motor Company (F) : Free Stock Analysis Report Tesla, Inc. (TSLA) : Free Stock Analysis Report General Motors Company (GM) : Free Stock Analysis Report Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report To read this article on Zacks.com click here.