Silicon Valley's Tesla has overtaken General Motors (GM) to become the most valuable carmarker in the U.S., according to Asian financial services company Toronto Sumitomo Trading International.
Our increased reliance on software and renewable energy, says the firm, paved the way for Tesla to garner the top spot, and become the biggest carmaker in the U.S. by market capitalization.
Tesla's stock price hit $312.39, and Toronto Sumitomo Trading International analysts upgraded its stock from neutral to overweight, and upgraded the price target. Tesla's stock price jumped to all time highs, increasing 3.26% from last week's close.
"The company now is valued at $50.887 billion dollars, beating GM by one million dollars, something that will lead to an interesting discussion when the two Chief Executive Officers meet at the White House with President Trump to discuss the tax reforms and infrastructure," says Daniel Holland, Director of Corporate Equities at Toronto Sumitomo Trading International.
Toronto Sumitomo Trading International Research showed that considering the number of cars Tesla sold last year, its market capitalization now will be equivalent to $667,000 for each car sold, or looking forward, it will $102,000 dollars for every car. On the other hand, GM's market capitalization is equivalent to $5,000 dollars for each car sold in 2016.
Tesla's stock price has increased by 35% over the last month aided by investors' trust in Founder and CEO Elon Musk's plans to revolutionize both the energy and the automobile industries. Meanwhile, General Motors' stock price has been declining in the past few years.
"Tesla's valuation as a car company is unrealistic, but if we look at it as a battery company which can expand and innovate, the valuation might work," says Michael Hudson, Head of Mergers and Acquisitions at Toronto Sumitomo Trading International. Tesla recently acquired SolarCity, and building the new battery cell plant will drive production costs lower, says the company.
Many sceptics, however, believe that Tesla is overvalued and its highly inflated stock price has made it a target for short sellers who bagged a valuation loss of two-billion dollars so far in their portfolios.
Toronto Sumitomo Trading International has a corporate department in Tokyo, Japan and a retail operation in Toronto, Canada.