From the Trading Desk: A Trillion-dollar Tesla?

October has proven to be a tremendous month for the S&P 500 Index and NASDAQ Composite following September’s sharp losses. Both indices are trading near record levels amid strong corporate earnings and have raised the question, one more time:

How much more can stocks continue rising? 

S&P 500 Index (SPX Index) 5-year monthly chart

October, or you could say the last few days, have been brilliant for Tesla marking a historic moment for the company. The electric car company’s stock started the month at $776 per share and as of Thursday had reached $1077. A number that gives the company a $1 trillion market capitalization and has brought Elon Musk’s net worth close to $300 billion. Elon is the wealthiest individual in the world and his net worth is larger than the market cap of Exxon Mobil. Furthermore, the combined net worth of the two wealthiest individuals in the world is about equal to JPMorgan Chase & Co, the biggest bank in the U.S.

What is happening?

Hertz placed an order for 100,000 Tesla Model 3s as the company aims to electrify its fleet of rental cars. This is the first step Hertz is taking to rebuild the company after declaring bankruptcy in June. The order is worth approximately $4.2 billion in revenue for Tesla and will take roughly one-tenth of the company’s production capacity. In the 3rd Quarter, Tesla reported record revenues and profits, although revenues missed expectations. In addition, Tesla’s Model 3 was the most sold vehicle in Europe in September. Another historic milestone as it marked the first time an electric car outsold its gasoline engine rival. 

Tesla, Inc. (TSLA) 6-month daily chart

The surge in Tesla is a continuation of the multiyear trend of investors continuing to pour money into the stock. Is Tesla worth $1 trillion dollars? It does not really matter what the fundamentals might say. As long as people continue to believe in Elon Musk and in Tesla, the company will most likely continue making history.