Tesla is now more valuable that the world's top seven car makers combined at $615bn and is the biggest entrant to the S&P 500 EVER - but experts warn the stock is too high and could plummet at any moment
Tesla is now more valuable than the world's top seven other car makers with a market capitalization of $615billion - but experts are warning its stock is too high and in bubble territory.
After a tumultuous past few years of production set backs and public scandals which even drove founder Elon Musk asking Apple CEO Tim Cook if he wanted to buy the company for a knock-down price, Tesla is now worth more than Ford, Honda, BMW, GM, Daimler, Volkswagen and Toyota combined.
The company was included in the S&P 500 on Monday at $665 a share which makes it the most valuable new entrant to the stock index ever. It had been valued even higher on Friday's close at $695 a share.
The sudden surge is prompting financial experts to warn that it may not last. Some say it is 'dramatically overvalued' and will plunge, along with the rest of the wider market, as fears grow over a new mutant strain of COVID-19 that has been found in the UK.
It is also threatened by Apple's forthcoming electronic car program.
'While Tesla is a great company, Tesla stock has very strong signs of being overpriced,' Vitali Kalesnik, partner and head of research in Europe at Research Affiliates, told CNBC on Tuesday.
'When we’re looking at the types of assumptions that we need to justify these valuations, one would need very, very aggressive assumptions.
'Tesla’s current valuation is in the bubble territory,' he added.
Tesla is now worth more than the top seven other carmakers in the world combined with a market capitalization of $615bn
Tesla's share price over the last eight years. It has skyrocketed this year but experts say is now in bubble territory
Tesla shares dropped as much as 2.2% on Tuesday morning, after plunging 7% on Monday, when it joined the S&P 500
His comments were echoed by JP Morgan Analyst Ryan Brinkman who said in a research note: 'Tesla shares are in our view and by virtually every conventional metric not only overvalued, but dramatically so.'
Tesla's stock has increased in 2020 by more than 650 percent and by 800 percent over the last two years.
Tesla founder Elon Musk pictured in September
The 2020 boost comes largely from the reopening of its California factory in May after the pandemic shutdown, and in July, when the company posted is fourth straight quarter of profits and beat production estimates.
But hours after joining the S&P 500 on Monday, the share price plummeted by some 6 percent.
S&P Dow Jones announced back in November that Tesla would be joining the index, with trading beginning on December 21.
By joining at its highest ever price, which drove the overall value of the index up, the company has single handedly cost index funds handsomely.
Apple's electronic car - which it has promised to deliver by 2024 - is also a threat.
Reuters reported on Monday that the company, one of the largest in the world and one of the only companies to have ever been valued at $1trillion, was developing its own vehicle.
Musk tweeted on Tuesday that he'd appealed to Apple CEO to buy the company when it was struggling with production setbacks of its Model 3 car
A Tesla Model 3 is seen at a showroom in Beijing in October. The company was not expected to produce as many as it has this year which has driven up profits
Musk later tweeted that he'd once asked CEO Tim Cook to bail him out and buy Tesla for '1/10' of what it is currently worth.
'During the darkest days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value). He refused to take the meeting,' he said.
Tim Cook, the CEO of Apple, has not commented publicly on his plans to make an electronic vehicle
The iPhone maker's automotive efforts, known as Project Titan, have proceeded unevenly since 2014 when it first started to design its own vehicle from scratch.
At one point, Apple drew back the effort to focus on software and reassessed its goals. Doug Field, an Apple veteran who had worked at Tesla Inc, returned to oversee the project in 2018 and laid off 190 people from the team in 2019
Since then, Apple has progressed enough that it now aims to build a vehicle for consumers, two people familiar with the effort said, asking not to be named because Apple's plans are not public.
Apple's goal of building a personal vehicle for the mass market contrasts with rivals such as Google-parent Alphabet's Waymo, which has built robo-taxis to carry passengers for a driverless ride-hailing service.
Central to Apple's strategy is a new battery design that could 'radically' reduce the cost of batteries and increase the vehicle's range, according to a third person who has seen Apple's battery design.
Apple declined to comment on its plans or future products.
Making a vehicle represents a supply chain challenge even for Apple, a company with deep pockets that makes hundreds of millions of electronics products each year with parts from around the world, but has never made a car.