In a marketplace where companies are finding it hard to compete against one another to maintain steadiness and consistency, Tesla is in a league of its own. The Musk-led company’s stock shot up by 20 percent in a single day, which happens to be its biggest gain in one day since 2013.
The spike happened courtesy of Panasonic’s earnings in its U.S. battery business with Tesla. Tesla stocks are trading at $780 at the time of writing. To put things into perspective, TSLA shares traded at $354 the day the Cybertruck was launched in November, and in just over two months, the prices have more than doubled. Guess it’s time to invest in Tesla if you haven’t already.
Tesla and Panasonic’s Growth Triggered The Stock Rise
Tesla is the world’s largest consumer of lithium-ion batteries, but Panasonic was lagging behind in supplying them, thus limiting the Model 3’s production. But it wasn’t just Tesla complaining. As it turns out, Panasonic execs weren’t happy with Musk’s antics, including the incident where he appeared to smoke pot with comedian Joe Rogan. However, things stabilized soon after, and today, the happy couple is reporting profits that have resulted in a win-win situation for both in the stock market. Who said only human relationships are complicated?
According to Reuters, Panasonic reported profits of 100.4 billion Yen (approximately $915 million) in the fourth quarter of 2019. In the same quarter in 2018, Panasonic reported a profit of 97.6 billion Yen (approximately $899 million). The Japanese company’s profit numbers beat analyst projections by a considerable margin. Tesla, on the other hand, reported profits to the tune of $7.38 billion in the last quarter of 2019. The company delivered a record 112,000 vehicles in this period. Tesla went on to say that it will comfortably deliver over half-a-million vehicles in 2020.
Will Their Partnership Last In The Long Run?
It needs to be seen how things will go from here. Tesla is working on producing its own battery cells in the near future. In April 2019 at Tesla Autonomy Day, the company announced a few things we can expect in 2020, and the million-mile battery was one of them. Tesla cars are built to last 1,000,000 miles, but the batteries don’t last that long. Musk has mentioned on previous occasions that the battery modules last between 300,000 and 500,000 miles. However, the new Tesla battery pack, that’s still in development, could do the unexpected - last almost a million miles.
Jeff Dahn, the leading battery researcher at Tesla, said that the new battery is a Li-Ion units with a next-generation “single crystal” NMC cathode and a new advanced electrolyte. After testing these cells extensively, they think that the battery could power an electric car “for over 1.6 million kilometers .”
Although things between Tesla and Panasonic seem steady as of now, Tesla officially signed an agreement with Contemporary Amperex Technology Co Ltd. (CATL) for Shanghai’s Gigafactory battery cell supply. Currently, the deal is signed for a period of two years, between July 2020 and June 2022. This may not hamper the Tesla-Panasonic partnership, but Tesla is not fully relying on Panasonic anymore.
What Else Triggered This Surge?
Other than the Panasonic news, there were a few more factors that led to this rise in stock price:
-* In the earnings call held at the end of January, Tesla reported a second consecutive profitable quarter and also promised investors profitability moving forward.
-* Prior to this sudden surge, Argus Research, a Wall Street firm, raised its price target for Tesla from $556 to $808, citing Tesla’s strong fourth-quarter results and consistent rise in sales.
-* The phenomenal response in China and the way Tesla had the factory running in less than a year from breaking the ground added to this surge.
-* ARK Investment Management updated its valuation model and noted that the stock could be anywhere between $7,000 - $15,000 per share by 2024.
Final Thoughts
The first quarter of 2020 could see a massive spike as well, as the company is all set to launch the Model Y soon. Elon Musk believes that Model Y will eventually be the highest-selling product for the company. Musk said that "ultimately Model Y will have more demand than probably all of the other Tesla cars combined. Model Y will also have advanced manufacturing technologies that we will reveal in the future.” So, this will definitely have an impact on the company’s future. The only roadblock seems to be the Gigafactory 4 which has run into hurdles due to the deforestation activities.
How long do you think Tesla will take to touch the $1,000 stock price? Share your thoughts in the comments section below.