<p>The new coronavirus has not been kind to car stocks. Car manufacturers have been hit hard, with dealers closed, facilities idling and consumers seeking relief from payments. The exception is Tesla (NASDAQ: TSLA). Despite the chaos that has taken place in the global economy – and petrol prices at a low year of four years – the TSLA share has shown a growth of 73% so far in 2020.
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That includes a 14% pop on Monday. And yesterday, double-digit growth approached once again.
What happens to TSLA shares? Why does it continue to grow in such a clip, and what triggered Monday’s big win?
The TSLA stock is moving against the current
Monday was another tough day for carmakers. All the major manufacturers saw their stock slide as coronavirus lock-in continued. Ford (NYSE: F) fell 3.9%. General Motors (NYSE: GM) closed down 4.3%. Toyota (NYSE: TM) also closed 1.7%.
Tesla, on the other hand, saw its stock pop rise by almost 14%.
We all know why the traditional car manufacturers see their shares fall. First-quarter car sales declined before the coronavirus struck, and in March US sales of new cars and trucks fell by 40% to 50%. With dealers closed, massive unemployment and financial uncertainty ahead, car sales in the second quarter could be even worse. And to move all cars from lots, car manufacturers have had to resort to discounts and payment facilities for buyers – measures that will reduce profitability.
So why did the TSLA stock go in the opposite direction on Monday? There were several factors at play. The first is that with Tesla’s revenue for the first quarter due on April 29, card sellers are rushing to cover their investments. The second is a series of analyst upgrades at Tesla, including nods from Oppenheimer and Credit Suisse (subscription required).
Why Tesla Positivity?
Coronavirus has hammered stock of traditional car manufacturers. Ford – which recently saw its inventory downgraded to junk status – has seen its inventory value fall by 47% by 2020. GM has lost 43%. Tesla has gone in the opposite direction. Yes, TSLA took a big hit during the worst of the market sales, but it has recovered. By the end of Monday, Tesla shares had risen 73% by 2020, despite hitting through late February and early March.
Although low petrol prices appear to favor traditional cars and lorries over electric vehicles, it is expected that current prices will not hold. An oil price war and low demand have combined to bring gas prices to four-year lows, but OPEC + has agreed to reduce oil production. And when the locking of coronavirus is facilitated, the demand for gasoline will rise to normal levels.
So the low petrol prices are a very temporary advantage for traditional cars. And it comes at a time when retailers are closed and consumers are cautious about spending.
Tesla has already worked on an online sales model. It is mainly business as usual for the electric car manufacturer. In addition, Tesla sells premium vehicles. The company’s customers tend to be affluent, making them less likely to persevere with a purchase. And with coronavirus restrictions in China, Tesla has been able to increase production at its Shanghai Gigafactory.
The conclusion of the TSLA share
Despite its fantastic performance during the coronavirus pandemic, the TSLA share is still a risky investment – especially as a long-term holding. Traditional car manufacturers are increasingly turning to offering electric cars. Electric pickup trucks are coming soon too.
It will provide competition at a level that Tesla has never had to face, although the current situation has probably been postponed until 2021.
Despite recent upgrades, investment analysts who recommend buying Tesla shares are relatively rare. In fact, you are more likely to find someone who recommends that you download your TSLA shares while they are still trading at these levels. The majority have TSLA rated as one direction (with a median price of 12 months for the median price of 500 months) and sit to see how things play out until 2020.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a leading contributor focusing on consumer technology for Forbes since 2015. At the time of writing, Brad Moon held no position in any of the above securities.