Tesla Surpasses Toyota To Take The Crown As World's Most Valued Automaker

Electric vehicle pioneer Tesla Inc TSLA is now the undisputed leader among automakers in terms of market capitalization, thanks to the breathtaking rally in its stock seen since it bottomed in mid-March during the coronavirus-induced market meltdown. 

Tesla's Staggering Valuation: Tesla's shares are valued at $208.4 billion, based on the current stock price of $1,123.65 and 185.48 million outstanding shares.

In comparison, Japanese automaker Toyota Motor Corp TM, which held the top spot previously, has a market cap of $202.74 billion, based on the closing price of its shares on the Tokyo Stock Exchange Wednesday.

The feat is commendable for a relatively new entrant in the sector. Tesla was founded in 2003 and went public in June 2010 by offering 13.3 million shares at $17 each. 

Tesla's market cap breezed past the combined market cap of traditional U.S. automakers General Motors Company GM and Ford Motor Company F in early January, when its shares hit a then-record high of $492.14, rendering the valuation at $89 billion.

When debt is included, Toyota is valued at $284 billion compared to Tesla's enterprise value of $207 billion, the Financial Times reported, citing data from Sentieo.

Tesla Catalysts Driving The Rally: Tesla shares broke above a long-term resistance around the $385 level in mid-December 2019. After that, the stock saw a meteoric rise and peaked at $944.78 Feb. 19.

The momentum in shares was supported in part by the progress Tesla was making in China, the hot-and-happening EV market. The company began rolling out the first Model 3 vehicles from its Shanghai Gigafactory in late December 2019.

After turning profitable in the third quarter of 2019, Tesla reported a profit yet again in the fourth quarter. Belying expectations, the company continued its profit-generating streak and reported a surprise profit for the first quarter of 2020.

The stock also received support from the news flow related to Model Y crossover SUVs, which began rolling out in mid-March, and its Cybertruck.

See also: Tesla Now China's Largest EV Manufacturer By Output: Report

After the mid-February peak, the stock experienced a downturn along with the broader market in the aftermath of the COVID-19 pandemic.

The stock retreated to a low of $350.51 March 18, translating to a peak-to-trough decline of about 63%.

Tesla's stock took off from there at a breathtaking pace and breached the $1,000 level intraday for the first time June 10.

After moving back and forth around the mark on investor worries over a weak second quarter due to the COVID-19 impact on deliveries and production, the shares have seen a marked upward momentum in recent sessions. 

The stock hit new highs —both intra-day and closing — both Monday and Tuesday, and appears on track to close at a fresh high Wednesday.

Recent optimism concerning a quarter-end-push by Tesla that could lift its performance beyond expectations despite a lukewarm April-May period has generated renewed buying interest in the stock.

Where Tesla Is Headed: Tesla, being the EV pioneer, has superior technology and a competitive edge.

Recently, the company announced its Model S Long Range Plus electric vehicles in North America, which have an official EPA-rated range of 402 miles.

The company is also working with Chinese supplier CATL on a 1-million-mile battery. 

Apart from selling cars, Tesla has potential opportunity in the form of high-margin recurring software revenue through is full-self driving advanced driver assistance system, according to Morgan Stanley analyst Adam Jonas.

Notwithstanding its prospects, the sell-side is skeptical about Tesla's heady valuation. This is reflected by the average analyst rating of Hold for the shares.

TSLA Price Action: At last check, Tesla shares were rallying 4.1% to $1,124.12. 

Related Link: Tesla On Track To Beat Q2 Deliveries Forecast, Analyst Says

Photo courtesy of Tesla.