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Why Shares of Tesla Soared Nearly 30% in June

By John Bromels – Jul 6, 2020 at 6:17PM

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A spate of good news boosted the stock. A new competitor may have boosted it even more.

What happened

Shares of electric-car maker Tesla (TSLA 2.51%) rocketed 29.3% in June, propelling the company's stock price above $1,000 a share for the first time ever, according to data from S&P Global Market Intelligence.

Since the end of June, it's gone up even further, and it's currently hovering around $1,400 a share. Over the past year, shares of the upstart auto company have blasted up about 500%, absolutely obliterating the S&P 500's 6.3% gain. 

A man with an illustrated cape appears to fly towards a dollar sign.

Image source: Getty Images.

So what

Tesla's 2020 performance represents a head-spinning turnaround from 2018, when the stock price basically went nowhere, and 2019, when its share price plummeted below $200 a share in May and spent most of the rest of the year climbing out of the hole. In June, a steady stream of positive news helped fuel the carmaker's rise:

  • On June 8, news broke that the Chinese version of Tesla's Model 3 -- which is manufactured in Shanghai -- saw record-breaking sales in May. Not only did sales more than triple from April to 11,095, from 3,645, but they also surpassed March's record of 10,160. That caused a big pop in the company's stock.
  • Also on June 8, newly public rival carmaker Nikola (NKLA 1.30%) -- which is also named after inventor Nikola Tesla -- announced it would begin taking reservations for its own electric pickup truck, the Badger, on June 29. Considering that Nikola has also been focusing on the semi-truck market, its stock's outperformance increased interest in -- and provided some validation for -- Tesla's proposed Semi and Cybertruck products.
  • Late on June 9, an internal Tesla email leaked, in which CEO Elon Musk told employees that "it's time to go all out and bring the Tesla Semi to volume production."
  • Musk tweeted on June 21 that a seven-seat, three-row option for the Model Y crossover SUV would likely begin production in 2020 instead of 2021. This cheered investors, as it's a sign that the company is doing a better job of accelerating production, which should lead to higher growth. 
  • On the last day of Q2, Tesla's stock surged as rumors abounded that it might post a fourth consecutive quarter of profitability. That would make it eligible -- some even say a shoo-in -- for inclusion in the S&P 500 index, which would trigger buying interest from index funds and other institutional investors. 

Now what

By most traditional valuation metrics, Tesla's stock is unbelievably overpriced at the moment. However, that hasn't stopped its share price from going up in the past, and it certainly won't stop it from rising in the future, as long as investors are bullish on the company's prospects. And indeed, Tesla's future looks more certain now than it has at any point in the past.

Still, overvalued companies don't usually stay overvalued forever. Either a price correction comes along or the shares languish until reality catches up to the hype. Tesla's shares may very well continue to rise in the short term. That doesn't necessarily make it a good long-term investment. 

John Bromels owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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Tesla, Inc. Stock Quote
Tesla, Inc.
$282.94 (2.51%) $6.93
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