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Tesla Will Top Toyota as World’s Largest Automaker, But It Won’t Last Long

Last Updated September 23, 2020 2:02 PM
Andrew Packer
Last Updated September 23, 2020 2:02 PM
  • Tesla’s valuation is now within 5% of Toyota Motors, the gargantuan player in the space.
  • The electric-car company will likely de-throne Toyota soon.
  • However, one indicator suggests Tesla may take a breather first.

Markets have a love-hate relationship with Tesla Motors (NASDAQ:TSLA). The electric car maker is either a market darling or out of favor.

In the past 12 months, it’s mostly been beloved by the market, with shares up over 380% .

Tesla, S&P 500
Year-to-date, Tesla shares have beaten the pants off of the diversified S&P 500 Index, putting its market cap closer to industry leader Toyota. | Source: Yahoo Finance 

Year-to-date, shares are still up an impressive 158%, and the S&P is down over 5%. If only Tesla had been added to the Dow or S&P 500 Index!

Now, the company’s share price is marking another milestone. The company’s total market cap is now closing in on that of automaking giant Toyota (NYSE:TM).

Another 5% rally in Tesla shares will get the job done. It’ll also be enough for the company to hit a price target that was once unthinkable.

Behind the Numbers, Tesla Still Lags Toyota

The achievement would have seemed impossible just two years ago when shares were trading at a fraction of today’s price.

And it’s not just the share price either. The underlying company has ramped up production and moved past a low point to get where it is today.

A few numbers tell a tale of two very different companies. In 2019, Toyota sold over 2.38 million cars, just in North America. Tesla sold 367,500—worldwide. Toyota brought in over $253 billion in revenue . Tesla brought in $21 billion. Toyota made a profit. Tesla did not.

Still, the company’s overall growth is what investors care about. That’s where Toyota has lagged, with a 1.2% drop in sales in 2019, while the upstart electric car company knocked it out of the park.

Tesla deliveries
Tesla deliveries have more than doubled since 2018, showing investors the kind of growth that justifies a massive rally in the share price. | Source: Cleantechnica.com 

Why King Tesla’s Reign May Be Brief

With Tesla shares seemingly unstoppable, the company has been nothing less than volatile. That swings in both directions, as investors learned in March when shares were cut down nearly 50% peak to trough.

Now, with shares breaking through past all-time highs, a few investors are starting to bet that the party is about to end.

Traders who have loved the volatility in Tesla have likely done well in the options market.

Now, there’s a rising trend of put buying against Tesla. Many of the top options trades by volume have been Tesla puts in recent days, with a spike on Tuesday as shares jumped more than 7%.

Barchart 6.30.20
Unusual options activity shows a surge in put option trades on Tesla, just as shares surged to new heights. | Source: Barchart.com 

The put options with the highest volume are betting on a quick pullback  in the next two days from the current price near $1,080.

And with thousands of these options being traded at a time, there are tens of millions of dollars in notational value of shares on the line.

It’s a race to see if Tesla can de-throne Toyota before the market closes early for Independence Day, or if the current king of the automakers will be dethroned another time.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.