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Something wild is happening to Tesla’s stock. Skeptics say it’s a bubble about to pop — while some bulls think shares, currently at $887, could hit $1,000 before the run is done.
What is clear is that Tesla has been the beneficiary of a massive rally. The electric carmaker’s stock has skyrocketed 36% in the past two days. Shares have doubled in price this year. And, perhaps most shockingly, they’re up more than 395% since the company’s most recent low in June.
Compare that performance to Ford, which reported a disappointing set of results after US markets closed on Tuesday. Shares are down 8% in premarket trading.
Why Ford is down: The company’s fourth quarter loss essentially wiped out its profit for 2019, and its guidance for 2020 was disappointing. The company is still working through its expensive $11 billion turnaround effort while dealing with a tough global environment for auto sales and higher warranty costs.
Why Tesla is up: Investors have been on a tear since Tesla reported its first annual profit last week, betting on future growth powered in part by the company’s new plant in Shanghai. The move higher could also be getting some juice from short sellers who are trying to cover their losses, as well as battery maker Panasonic’s positive remarks on the state of its Tesla partnership.
But here’s a reality check: Ford sold nearly 5.4 million vehicles last year, and has a market cap of $36.4 billion. Tesla, which delivered 367,500 vehicles in 2019, is now valued at $159.9 billion.
“We don’t know how high Tesla’s shares will get, but with the company valued at a premium to the vast majority of the largest stocks on the planet, it’s hard to take it seriously as something other than a combination of speculative excess and positioning,” Bespoke Investment Group told clients on Tuesday.
Still, the Bespoke team warned that “there’s no reason Tesla’s bubble can’t keep running, which should give bears pause even as bulls look nervously at their huge gains.” Shares are down 4% in premarket trading Wednesday.
At the very least, it looks like Saudi Arabia’s Public Investment Fund may have some regrets after selling most of its Tesla stake last quarter, according to regulatory filings posted Tuesday…
Next up: GM reports results from the final three months of 2019 before US markets open. Expect significant attention on the company’s forecasts for 2020.
Stocks are moving higher amid a global health scare
Coronavirus continues to spread globally, with more than 24,500 infections reported across 25 countries. But investors seem ready to move on, piling back into riskier assets.
See here: The Nasdaq hit a new all-time high on Tuesday. Stocks in Asia notched their second straight day of gains on Wednesday, while Nasdaq futures are up another 0.9%.
Ipek Ozkardeskaya, an analyst at Swissquote, told me that it’s part of a broader trend: With interest rates low and other monetary policy supportive, stocks can’t help but rebound quickly from one-time shocks.
“Money just flows into the stock markets, whatever happens,” she said.
Bond investors, on the other hand, are still cautious. The yield on benchmark 10-year US Treasuries remains depressed, near 1.6%. That indicates heightened demand for the note, which is viewed as a safe haven asset.
There’s some chatter that stocks could head lower again when the earnings season ends and investors refocus their attention on the economic impact of coronavirus. But Ozkardeskaya thinks that stocks are more likely to continue their upward trend.
Why investors are disappointed in Snapchat
Snapchat is now consistently adding users and growing its business in a highly competitive market. But that may not be enough to appease investors, my CNN Business colleague Kaya Yurieff reports.
Shares of the company are down nearly 8% in premarket trading after it posted slightly weaker revenue growth for the final three months of 2019 than analysts expected.
The dip marks a rough start to the year for a company that had been on a tear recently, finally trading above its IPO price of $17 a share. It closed at nearly $19 per share on Tuesday.
Still, the social media market is only getting more competitive, particularly with the entrance of TikTok. “Any indication of weakness, even a slight miss on revenue, may be enough to make investors jittery,” Kaya writes.
Coty, GM, Merck and Spotify report results before US markets open. GoPro, Peloton, Qualcomm, and Yum China follow after the close.
Coming tomorrow: The Reserve Bank of India makes a decision on interest rates as the country’s economy slows.