Please ensure Javascript is enabled for purposes of website accessibility

Why Tesla Stock Just Popped 4%

By Rich Smith – Aug 27, 2020 at 4:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Tesla stock is expensive -- but relative to this new Chinese stock, it kind of looks like a bargain.

What happened

One day after getting a boost from a positive analyst note out of Jefferies & Co., shares of Tesla (TSLA 10.97%) are revving once again, up 4% in 3:30 p.m. EDT Thursday trading.

With no new news about Tesla per se out on the wires, today, I think you have to credit today's stock price explosion to new Tesla rival Xpeng (XPEV 4.81%).

Rising red stock arrow representing a stock going up drawn on a yellow background.

Image source: Getty Images.

So what

Xpeng, as my Foolish colleague John Rosevear explained today, is the newest IPO in the electric-cars space, having just raised $1.5 billion selling 100 million American depositary shares (ADSs) at $15 apiece on the NYSE -- a result that Barron's calls "really, really" good.  

Now what

And here's the thing: Xpeng won this valuation despite having no profits whatsoever. (To the contrary, John says Xpeng lost about half-a-billion dollars last year and is continuing to lose about $200 million every six months today). Yet despite this lack of profits, S&P Global Market Intelligence puts the Chinese electric-vehicle maker's valuation at a cool $10.2 billion -- or about 34 times trailing-12-month sales of $303.5 million.

Now, if Xpeng is worth 34 times sales without profits, but Tesla shares are selling for less than 15 times sales with profits, does this perhaps mean that, despite a market valuation now approaching $420 billion, Tesla stock is actually still undervalued?

That seems to be the thinking on Wall Street today, which would explain why Tesla stock is still going up.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.