Tesla Makes History : 1 Trillion Market Cap and Ba3 Junk Bonds!
A monumental achievement for Tesla: It has finally reached a Market Cap of 1 Trillion dollars!! Tesla is the fifth company ever to reach such a valuation but, it defied the odds to be the only company on that list to still issue speculative grade bonds also known as Junk bonds. The last update came in March 2021, when "Moody's Investors Service upgraded the ratings of Tesla Inc. (Tesla), corporate family to Ba3 from B2, senior unsecured to B1 from B3 and speculative grade liquidity rating to SGL-1 from SGL-2". On October 25th, it was announced that (bankrupt) Hertz "ordered" 100,000, Model 3 vehicles for a whooping $4.2 Billion (25% of their current total assets). Y'all are probably wondering: How in the world are they going to produce 100,000 vehicles IN THIS ECONOMY? idk... semiconductor factory, giga factory, ai robots? For perspective, in 2020 Tesla delivered 500,000 cars. Ordered is not the same as fulfilled, just ask the CyberTruck or The Dale. Nevertheless, investors bought up Tesla stock increasing the Market Cap by 70 billion. Yes a $4.2 billion dollar deal caused a $70 billion move in capitalization.
A Tesla bull would most likely be valuing Tesla at around 2 to 4 trillion market cap, to be interested enough to own it and not another asset. Tesla has the vision to reach that goal with factory automation, factory growth into the developed world i.e China-India, Innovational patents, commitment to crypto, consumer solar panels, battery tech, expanding charging infrastructure, Tesla's own Dojo chip and AI self driving. In the past, when Tesla rises by more than 10% is a single trading day, that gain is usually retraced before moving higher. I would look to buy between $835-945. However, the most bullish signal for Tesla is that Pelosi has call options expiring March. I imagine she should be dumping at the top of this move.
A Tesla Bear has had a rough time to say the least. In this economy, nobody cares about fundamentals because, we got the FED and QE. They flooded the economy with artificial liquidity decreasing interest rates causing funds and investors to ditch treasury bonds and look for higher returns in more speculative assets and Junk bonds. These speculative assets can also be viewed as gaining value from future earnings. Companies use the easy monetary policy and cheap money to just focus on growth metrics so, they can continue to borrow money and issue junk bonds. This is why an unprofitable company's stock keeps going up up up. The best example, of this is Amazon. They were unprofitable for years, gained market share while losing money, get rid of all the minnows and finally they will end up profitable. Tesla and BTC roll together because of their shared demographics. Fundamentals don't affect Tesla, general market flows do because, most of the speculative money finds its way into Tesla. If you are under the impression of inflation running rampant over the next couple of years then, you would not be stoked about Tesla signing a deal that promises delivery in the future. Inflation can raise costs dramatically to the point where their margin will be significantly cut. Tesla is a hard stock to short. I would not recommend unless, you can afford longer dated options.
Comment:
I realize I didn't touch on the gamma squeeze experienced by Tesla: There were a bunch of Call Options expiring soon. When traders buy call option the market maker will offset this by buying shares of Tesla because they are usually the ones writing the Call. Because the market maker is now taking more risk by sinking capital into making these trades occur; they up the premium they receive. When this premium gets too expensive traders stop buying calls and eventually sell the underlying stock. However, this only occurs in the unwind whenever that occurs.