Tesla is finishing out the week after an incredible run that saw its stock price surge roughly 26% in the last seven days. The electric carmaker’s stock broke $2,000 per share on Thursday—just 50 days after it broke the $1,000-per-share barrier in June—and it’s now the ninth-highest valued company listed on the U.S. market, speeding past retail mega-chain Walmart and closing in on pharmaceutical giant Johnson & Johnson.
Elon Musk’s fleet of sleek, sustainable cars has been unstoppable lately. Here’s what to know about Tesla’s impressive rally:
Why the surge?
In short—analysts aren’t quite sure. Stock market machinations are complex and at times difficult to explain. But there are several factors that could be at play:
- Tesla’s stock split excited investors: A stock split is a sign of a company’s confidence in its near-term growth prospects, as no company needs to lower its share price with a split if it’s expected to drop on its own. Tesla announced a 5-to-1 split last week, which probably sent positive vibes to investors. Its stock is up 51% since the announcement.
- Tesla is riding a strong earnings result, which qualified the company for inclusion in the S&P 500: Tesla met the prerequisites for S&P inclusion with its latest quarterly report in July. Although the S&P selection committee has stayed quiet thus far, it’s possible that investors are trading on hopes that the company will be added to the index. If added, the stock will surely shoot up with the influx of index buyers.
- Maybe people just love Polynesian elevator music: According to a tweet from Musk, Tesla is rolling out a new feature that lets cars play Polynesian elevator music or snake jazz “through outside speakers wherever you go”:
New Tesla feature coming that enables your car to play snake jazz or Polynesian elevator music through its outside speakers wherever you go
— Elon Musk (@elonmusk) August 20, 2020
Okay, back to the stock split—when is that happening?
Shareholders as of Friday, August 21, will see their shares quintuple at end of day on Friday, August 28. The price of each share will then drop to one-fifth of its previous value—to around $400 from $2,000, most likely—which will make purchasing shares more accessible for at-home investors with less cash on hand. Trading on split-adjusted shares will start Monday, August 31.
What do analysts think?
Despite the perplexing nature of the surge, analysts are mostly bullish on Tesla stock, with a small sleuth of bears thinning as the company rallies on. Last week, two analysts from Morgan Stanley and Bank of America upgraded the stock from “sell” to “hold.”
“We wouldn’t bet against Tesla stock,” writes Barron’s Al Root today. “That’s been a widow-making trade, one that can end careers.” And analysts keep increasing their predictions for the stock’s base-case and best-case scenarios—they’ve had to, in order to keep up with Tesla’s nearly 400% climb year-to-date.
However, Root warns, “The stock is overbought in Wall Street parlance. That can be a sign shares are due for a correction”—i.e., a price cut. Although according to Root, “A correction to a rising moving average would still leave shares up north of 250% year to date.”