Tesla is now more valuable than 23 auto stocks in the Russell 3000 index. The global pandemic has affected the stock market and the world economy. Barron’s recently took stock of specific sectors of the economy, which may have been adversely affected by the virus’s effects on the world. The automotive sector was on the list.
The three automotive stocks on Barron’s list were Aptiv (APTV), Lear (LEA), and General Motors (GM). Aptiv and Lear are auto parts suppliers for big car manufacturers like General Motors. Auto parts and auto manufacturers are down 40% year to date. In contrast, TSLA (NASDAQ: TSLA) is up 80% year to date.
According to the trusted financial website, auto sales fell by 35% in March and are expected to drop even further in April. ARK Invest CEO Cathie Wood explained that the automotive industry is currently in turmoil.
People aren’t focused on their vehicles right now, given the extended quarantine period and lockdowns occurring all around the world. Personal cars aren’t as essential when most people are staying home, and there are ride-hailing services in the mix. However, Tesla seems to have managed relatively well despite the adverse effects the pandemic is having on traditional OEMs.
Tesla as a Tech Company
The Wall Street Journal listed Tesla as one of the companies that have not been diminished by the virus’s effects and could swiftly rebound once the pandemic ends. It appears that TSLA could hold its own when compared to the NYSE FANG+ index, which includes some of the biggest names in the tech industry. FANG refers to Facebook, Amazon, Netflix, and Google. Sometimes investors consider Apple and Google’s mother company, Alphabet, as part of FANG as well.
For TSLA to be mentioned in the same breath as FANG+ companies speaks volumes about the EV automaker and its future. First, it may have clarified Tesla’s identity as a company, namely whether it should be considered an automaker or a tech firm. It appears that while Tesla is undoubtedly producing cars, it also behaves like a tech company.
Second, TSLA’s potential significantly increased as a tech company. For instance, Tesla’s autonomous driving technology and Robotaxi fleet could change the automotive industry, similar to the way Apple changed mobile phones. The company’s push for autonomous vehicles may be the reason it is doing better than most traditional automakers. Tesla Energy also has specific projects in the works which are promising, like the Solarglass Roof V3 ramp.
This pandemic has shaken the global auto industry for many reasons, while the tech company has remained relatively stable, and some have even reached new highs. So the stability of TLSA stocks may come from its potential as a tech company and not just its future as an EV automaker.
Tesla’s Q2 2020 Outlook
TSLA stock dipped slightly like other companies did when the pandemic was first announced, and cities all over the world issued lockdowns and quarantine advisories. To the surprise of many analysts, Tesla still managed to release stellar Q1 2020 numbers. Some analysts believed TSLA could struggle with Q2 2020 sales and deliveries if the pandemic persisted.
However, those bleak predictions might again be proven inaccurate since Fremont Factory has a high chance of resuming operations as early as May 4, thanks to the revised guidelines for essential workers by an agency in the US Department of Homeland Security.
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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
Ma. Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.
About the Author
Ma. Claribelle Deveza
Longtime writer and news/book editor. Writing about Tesla allows me to contribute something good to the world, while doing something I love.