Tesla Motors (TSLA) continues to prove the bears wrong, with TSLA now up almost 400% since Jan. 1 to almost $170 a share. TSLA stock first debuted at $17 in 2010 when Tesla held its IPO, so that makes shares up an amazing 900% in about three years.
Add one more amazing feat to TSLA, though, as this week the electric car manufacturer eclipsed $20 billion in market capitalization to become twice as large as Fiat (FIATY) by that measure of size.
Yes, TSLA is a fraction of the size of Fiat in output with a mere 21,000 of its Model S sedans set for sale in 2013 vs. over 1.8 million for the Fiat brands. So keep that in mind, TSLA bulls.
And yes, market capitalization is a fickle metric that is simply the value of a company on the stock market; it’s simple arithmetic where you multiply the share price times shares outstanding.
Click to Enlarge Plus, TSLA investors should remember what happened to Apple (AAPL) after the great market cap horse race with Exxon Mobil in (XOM) 2012. As AAPL stock crashed from $700 to under $400 a share, it lost $270 billion in market cap — the equivalent of almost 14 Teslas as the company is currently valued.
But still, it’s a heck of a feat.
Check out the following chart that illustrates Tesla stock and its market capitalization vs. other major automakers, courtesy of Zero Hedge.
TSLA Stock — What’s Next for Tesla?
TSLA continues to see big short interest as the bears bet against this electric vehicle manufacturer, but Tesla stock continues to look up. So should you buy?
Well, Tesla earnings continue to prove the naysayers wrong and result in short squeezes that push TSLA higher. And its strong backlog and stellar appeal with consumers and critics is tough to top; The Tesla Model S won the highest-ever rating from Consumer Reports and more recently won the highest five-star safety rating from U.S. safety watchdogs.
But amid the massive run-up in TSLA, it’s hard to ignore how frothy shares of Tesla stock have become. Just last week Stifel Nicolaus initiated coverage on TSLA with a “hold” rating, saying that its Model S must fend off both lower-priced electric vehicles as well as higher-class luxury offerings from major automakers Honda (HMC), Toyota (TM), General Motors (GM), Ford (F) and Nissan (NSANY).
I can’t help but think that eventually the run in TSLA will end badly for investors as expectations crash back to earth in this momentum stock.
But until then, there clearly are profits to be made. Consider in the past 30 days, TSLA is up 30% vs. a down market. Not a bad swing trade even though the company was already theoretically grossly overbought a month ago.
So be careful before counting out Tesla just because it’s overvalued. TSLA is now bigger than Fiat as measured by market capitalization and has shown no signs of slowing down.
Related Reading on TSLA
- Tesla is safe as well as sexy. (The Slant)
- Tesla stock has made “Teslanaires” out of believers. (Mercury News)
- David Trainer warns TSLA is looking bubbly after its run. (Forbes)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.