Tesla’s $600 billion run-up looks past major risks to EV growth

Tesla Inc. shares have nearly doubled in value since the last time the company reported earnings— a set-up that usually spells high expectations for upcoming results. But its car-selling business has become a sideshow to Elon Musk’s political prominence. 

A large chunk of its mammoth market value has been propped up by hopes it will be among the first to develop and market fully self-driving vehicles. Those expectations were turbocharged by Donald Trump’s election victory, as investors bet the closeness between Tesla’s chief executive officer and the US President will pave the way — ignoring cash flow risks from a possible roll-back of EV incentives.  

It’s almost as if the company’s ability to profitably build and sell the cars no longer counts. Trading in the options market suggests investors are preparing for a 7% move in either direction off Tesla’s fourth-quarter earnings report, due after Wednesday’s market close. That would be the stock’s smallest post-results swing since October 2022. Shares fell as much as 3.4% on Wednesday, while the broader S&P 500 Index declined 0.9%. 

“The market is behaving as if Tesla’s results don’t matter, and that may catch investors flat-footed in case of a large shock,” said David Wagner, portfolio manager at Aptus Capital Advisors. “The electric car business is still about $200 billion in market value, but it is still the funding mechanism for a lot of the actual sideshows.”

Source: FORTUNE