Just have a conversation with a random stranger and mention the word “investments” and there is a strong likelihood he or she will ask the inevitable question: “Did you invest in Tesla?” Tesla is all the rage in the investment world. It’s hard to go a day and not see Elon Musk, Tesla’s CEO, in the news for some new experimental project. There is some criticism surrounding Tesla that they are all “show” and no “go” in regard to their overall financial output, yet their stock has gone up 405% in just 2020 alone. Yes, you read that correctly. 405%.  Now you get why everyone is asking whether you bought Tesla at the beginning of the year.

There is a good chance if you are driving on the road and see some futuristic-looking car driving next to you, that car is a Tesla. The company has been increasing its car sales every year, doubling its sales last year by 50% and more than triple from the year before that. However, their number is still millions behind that of Ford and GM. Strangely enough, GM stock is down about 20% for the year while Ford is down nearly 27%. While other car companies have seemed to struggle this year, Tesla has absolutely soared. Tesla’s success could be baffling to the naked eye, but if you dig deeper into how Tesla works, you’ll understand their success does not always come from actual success, but rather through constant innovation.

Take this recent headline courtesy of the Street: “Tesla Secures Rights to Mine Its Own Lithium in Nevada”. What is lithium most commonly used for? Batteries. According to the article, “Lithium has been proven abundant in clay deposits in Nevada” and Tesla hopes to find a sustainable way to extract the lithium and use it for its own batteries.

Cue this next headline from Inverse: “Tesla’s Elon Musk Lays Out How to Transition Earth to Clean Energy”. Tesla has an ambitious plan to transition energy usage from fossil fuels to increased battery production. It becomes simple now to put these two articles together and understand that Tesla is buying mining rights to lithium to engage in an ambitious project to develop strong batteries that could revolutionize the energy industry.

Yet September told somewhat of a difference story. Tesla saw its stock dip nearly 15%, which naturally led to chatter as to whether Tesla was beginning to see some sort of “correction”. Tesla’s inexplicable rise might just be followed by an equally inexplicable fall. The interesting case with Tesla is that it performs in a way that other stocks in the market do not. Its performance does not necessarily rely solely on its success, but rather its continual drive to innovate.

Yes, its rise of 400% in 9 months during a year that saw huge losses due to a global pandemic is puzzling, but that doesn’t mean that Tesla will see a correction. It has already proven that it does not follow the norm, so why would it start now? There is no telling where Tesla is headed. It could easily see a correction in the next 3 months or see another huge rise.

The most important thing to remember when evaluating Tesla is that their success in the market is not always reliant on their financial success, whether its selling cars or building long-lasting batteries. Their success in the market relies on their ability to constantly sell themselves in the news through constant exposure and innovative ideas.


-Michael Urpi

Sources:
https://www.thestreet.com/investing/tesla-tsla-elon-musk-lithium-mining-rights-nevada
https://www.inverse.com/innovation/elon-musk-transition-earth-to-renewables