Much has been made of Tesla’s breathless rise to mind-boggling valuations in 2020. But the stratospheric rise of the Palo Alto-based company in California could also have a broader impact on general markets, not only Tesla or the nascent electric vehicle. a strategist at Deutsche Bank.
The rally shared by Tesla TSLA,
it has challenged conventional wisdom, especially when it comes to raising the car maker’s rise against other companies that produce cars for a long time on assembly lines before 2003, when Tesla was founded.
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Jim Reid, of Deutsche Bank, tries to put the company’s movements in a certain perspective, noting the obvious fact that Tesla has stood out this year: “it has increased + 704% and is now larger than the next five global car companies larger combined “.
through Deutsche Bank
Its huge size has been debated, but Reid suggests it will enter next year, especially since Tesla is included in the S&P 500 SPX index,
The fate of the market could eventually be influenced by early financial sponsor and current CEO Elon Musk.
See: The incorporation of Tesla into the S&P 500 is a “mother of all” stock market event
“In a remarkable 2020, Tesla could be the most remarkable market history of all,” the strategist wrote in a note Tuesday.
“Given its colossal size and that of the technology sector, its paths in 2021 will probably be a major macro driver of the markets. Investors in all asset classes may need to assess whether valuations are justified and sustainable, ”he writes.
Read: Opinion: Nio, not Tesla, is the best selection of EV stocks for 2021
Here’s the friction for Tesla fans, especially with its price-to-profit ratio standing at 1,278, according to FactSet data. Simply put, the P / E is the share price of an asset divided by earnings per share.
The average LTM or earnings for the last twelve months for the S&P 500 was 26.79. In other words, investors have been willing to pay $ 26.79 for every $ 1 in earnings of an average S&P 500 component, but were willing to shell out about $ 1,300 for every $ 1 in earnings produced by Tesla during the last year.
This is expensive.
Overall, Tesla shares have risen more than 656% so far in 2020, at the close of Tuesday. Meanwhile, the DIA Jones Industrial DJIA,
has gained 5.8% so far in 2020, the S&P 500 index has risen 14.4% and the Nasdaq COMP composite index,
has increased by more than 40% over the same period.
Still, few assets have been compared to Tesla in 2020. The question worth asking now is whether Tesla can drag the market down next year.