To recap my last post, Tesla has in fact become a trillion-dollar company. Earlier this month, CEO Elon Musk polled on Twitter whether he should sell 10% of his stake in the company. After his followers approved, he started selling although the trades were likely part of a preexisting 10b5-1 trading plan. Tesla’s stock declined under $1,100, but it has regained strength this week.
So how much more can stocks climb?
Much higher.
S&P 500 Index (SPX Index) 6-months daily chart
The S&P 500 Index is trading at record levels despite inflation concerns. Investors continue to wait for President Biden’s decision on his nominee for Fed Chair and subsequently how aggressive the Fed may be in raising interest rates.
For now, previous trends remain with tech stocks leading and commodity prices rising. The current mania is in EV stocks. Last week marked an important week for the EV industry with Rivian Automotive Inc’s (RIVN) IPO. The electric car company’s trading debut was a success as the company became more valuable than Ford and General Motors, even though they have yet to deliver more than 50 EV pickup trucks. Rivian’s stock rallied for five straight days after its debut before declining for two days in a row along with the industry group. Lucid Group Inc had surpassed Ford in market capitalization earlier this week.
Rivian’s potential in the space is massive as the company could deliver the first fully electric truck next year. However, they have reported no revenues prior to June. Furthermore, according to Bloomberg data, its administrative and research expenses were 17 times larger than Tesla’s in the two years prior to IPO. Tesla and Musk were (still are) heavily criticized for the company’s financials, yet the company was able to become profitable and eventually was added to the S&P 500 Index. Musk tweeted “I hope they’re able to achieve high production & breakeven cash flow, that is the true test. Because there have been hundreds of automotive startups, both electric & combustion, but Tesla is only American carmaker to reach high volume production & positive cash flow in past 100 years.” Rivian Automotive is now one of the top five most valuable automotive companies in the world.
Could Rivian be the next Tesla?
In the current environment with unprecedented retail investor activity and cash levels, it would be no surprise that these EV companies continue climbing.