Tesla (NASDAQ:TSLA) shares broke all rules of logic when the stock rose 28% last week and by over 50% in the month. Shares started at around $1000 this month and closed at $1545 last week. The stock is clearly in a bubble in relative terms.
Toyota (NYSE:TM) had a market cap of around $200 billion after shares traded off its $145.41 yearly high. What is the logic in Tesla’s valuation nearly exceeding that of Toyota and Volkswagen combined? Toyota has a healthy hybrid vehicle lineup that is more practical in many parts of the world. In colder climates and in places where charging stations are not abundant, a Toyota vehicle is a better option.
Tesla fans will point to the high volumes of computing parts and solutions in each vehicle. Styling is also superior to that of Toyota, VW, and Porsche (to some extent). If Tesla Model Y quality issues do not hurt demand and sales of the lower margin Model 3 continue their growth rates, then Tesla’s stock price should keep rising.
With this momentum, Tesla is on its way to $2,000. And at that price, investors who bought the stock recently may want to book some profits, just in case valuations matter again and trigger selling in Tesla shares.
