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Jan 8, 2021

Tesla extends record winning streak after Evercore capitulates

Elon Musk surpasses Jeff Bezos as world's richest person

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Tesla Inc. rose for an 11th day Friday, its longest winning streak, after Evercore ISI removed a sell rating on the stock for the first time in a year.

Shares rose as much as 8.4 per cent to a fresh record after analyst Chris McNally upgraded the stock to the equivalent of a hold, telling clients in a note that “whether we call it valuation confusion or valuation rotation, we have been on the considerably wrong side of Tesla for over a year now.” That came a day after RBC Capital Markets’ Joseph Spak said he got the stock “completely wrong.”

McNally raised his price target on Tesla to US$650 from US$225, which is still well below the US$880 range it hit on Friday.

He said investors view Tesla as two separate technology companies -- one that’s a market leader in electric vehicles and another that has several potential businesses, from full self-driving cars to a battery and powertrain developer. While one part of the Elon Musk-led company’s value comes from the revenue it generates, McNally said there are two other components that are more market driven and are a “bet on an uncertain future and a bet on Elon himself.”

The market is currently ascribing a US$100 billion value to Tesla’s self-driving initiatives, and about US$80 billion to the potential of it becoming a battery and powertrain supplier, he said, with about US$25 billion to US$75 billion to a possible energy-storage business that some think could become larger than the car business.

The electric-vehicle maker’s stock has been on a relentless surge over the past year, recording an incredible 743 per cent gain in 2020 and a further 24 per cent in the first few trading days of the new year. Its market valuation, now standing at US$829 billion, only lags behind a handful of technology behemoths on the S&P 500 Index -- Apple Inc., Microsoft Corp., Amazon.com Inc. and Google parent Alphabet Inc.

And while the rally in the stock may have been a hard one to predict, Tesla has also had a good year operationally. The company reported a fifth straight quarter of profit in October, laid out plans to halve battery costs over the next three years and started delivering cars made in its factory in China.

Investor enthusiasm for the stock also got a big boost as analysts and market watchers started predicting its addition to the S&P 500 Index around mid-2020.

The stock’s gravity-defying rise has made Musk the richest person in the world earlier this week, surpassing Amazon’s Jeff Bezos, and also turned the limelight to Ark Investment Management, a shareholder in the stock and one of the most vocal and ardent Tesla bulls. Musk holds an 18 per cent stake in the company, and Ark has 0.36 per cent.

Shares of other electric-vehicle companies also jumped Friday, after Hyundai said it has been contacted by a number of potential partners for the development of autonomous EVs.

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