Tesla surprised skeptics and company watchers last week when their stock rose above Ford's. Elon Musk's investors were happy though analysts remained cynical. Furthermore, they advised caution regarding overvaluation of the company's shares.
Tesla Stocks Going Strong
Thanks to their report of a record delivery of cars in the first quarter of 2017, confidence in electric vehicle company Tesla rose. Because of that, their stocks also gained a significant 7% boost on Monday. And on Tuesday, it gained another 1% pushing it above Ford, breaking the $300 line for the first time. Now, it is also poised to challenge General Motors to become the most valuable auto company in the United States, BBC reported.
On top of their record delivery report, Tesla stocks also received a lift thanks to another news. It was the announcement that they will begin production on their Model 3 sedan this summer. Additionally, the company is also expanding into battery production. Furthermore, Chinese firm Tencent bought a 5% stake in the company for $1.78 billion that people believed to be a vote of confidence.
Analysts Sound Out Warnings
However, those things did not stop analysts and critics from criticizing the Elon Musk-headed company. Fortune wrote that Brian Johnson from Barclays said Tesla stock investors took the blue pill from The Matrix. Because of that, they are living in a dream rather than facing the fact that the company still faces a mountain of challenges.
Johnson added that though Tesla has rolled out Autopilot, they are not even further ahead of their competition. The Barclays analyst also believes that they will face significant challenges from their rivals in the electric car industry. Yet despite his warning, the company's stocks is still on solid ground.
Meanwhile, Forbes contributor Bryce Hoffman said that confidence in Tesla and their stocks is based on a dream. That is because investors argue they are not buying the Silicon Valley company of now, but of the future. They also say that the electric automaker is aligned with where the world is currently heading. But other auto companies also have the same vision and they are working hard on it.
Despite those warnings, why do investors still find Tesla appealing and are confident that its value will rise? According to CNBC, it is the power of the company's compelling story. They have enticed investors to the point that their stock prices are immeasurable by standard valuation methods. This puts them in the realm of what is called story stocks.
Developments surge the value of this story stocks, such as in the case of Tesla. It is an exciting progress for the automaker, but it is also one that should be approached with caution. After all, not all story stocks like Amazon flew high and dominated their industries. There are also those that soared for a while but crashed hard at a later time.