Tesla is a Screaming Buy as It Joins the Elite $1T Club
Tesla, Inc. TSLA recently became the first junk-rated company to get its ticket into the coveted $1-trillion club. After all, the company’s debt may still be considered speculative-grade, per data amassed by Bloomberg. Nonetheless, the automaker’s shares popped 12.7% on Oct 25 and helped the company’s market capitalization reach near $1.03 trillion.
Incidentally, Tesla also became the second-fastest company to hit the $1-trillion mark. It reached the elite mark in little more than 12 years, second only to Facebook, Inc. FB, which took just over nine years to reach the mark from its initial public offering.
Tesla is, at present, the fifth company in the history of the United States to be worth more than $1 trillion. Apple Inc. AAPL is currently the most valuable company globally at $2.5 trillion, followed by Microsoft Corporation MSFT, which is now worth $2.3 trillion.
Alphabet Inc. GOOGL and Amazon.com, Inc. AMZN are the other two companies that have a trillion-dollar market capitalization. However, Facebook that saw its valuation hit $1 trillion in June, is now at around $927 billion, thanks to the tarnishing of its reputation by a former employee and issues related to stolen documents.
Tesla, by the way, witnessed its shares climb almost 30% so far in October. In fact, yesterday’s jump in its share price helped Elon Musk add more than a whopping $20 billion to his net worth in a single day, making him the world’s richest man.
Tesla, in the meantime, has surpassed the combined market capitalization of the next nine biggest automakers. To put things into perspective, major peers such as Toyota, GM, and Ford are just worth $237 billion, $84 billion, and $64 billion, respectively.
In reality, the price leap in Tesla’s shares was triggered by news that Hertz would buy 100,000 of the automaker’s Model 3 fleet. Such a purchase will certainly help Tesla become a brand for the masses and not just the affluent. Presently, the Model 3 sells for about $40,000.
At the same time, upbeat third-quarter earnings results propeled Tesla’s share price higher. The electric vehicle manufacturer saw its revenues soar 57% to $13.8 billion in the third quarter, as mentioned in a Markets Insider article. The article further noted that Tesla’s adjusted earnings per share for the said quarter came in at $1.80, more than analysts’ estimate of $1.61. Despite supply-chain disruptions and issues related to chips, the automaker notched record performance in the third quarter and is further expected to do well banking on the continuous demand for its Model Y vehicles manufactured at the company’s plants in Berlin and Austin.
Tesla’s shares have surged more than 40% so far this year and are more likely to scale upward due to robust demand for electric vehicles (EV) in the near term. Citing a globenewswire article, the global EV market is expected to see a CAGR of 22% from 2021 to hit $700 billion by 2026, according to Facts and Factors.
And why not? As several countries aim to reduce carbon emissions, the demand for EVs is surging at the moment. No doubt, electrifying the fleets will reduce carbon emissions. What’s more, President Biden has also pledged to spend a staggering $174 billion to boost the EV market in the near future. All these should certainly stand in good stead for Tesla that has already played a pivotal role in transforming the EV market. Tesla, currently, is a dominant player in the EV segment and has compelled the world to rely more on sustainable energy.
Consequently, the company’s shares are expected to climb 149.6% this year. For the next year, shares of Tesla are projected to gain 29.3%. Additionally, the Zacks Consensus Estimate for its current-year earnings has moved up 10.5% over the past 60 days. Tesla boasts a Zacks Rank #1 (Strong Buy) and a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
