Tesla (NASDAQ: TSLA) shares soared over 50% in October, accelerating past the $1trn market cap mark. This trajectory has since slowed, with the current share price sitting at $985 and market cap sitting just below that $1trn level.
Tesla shares: up and down
The main reason for Tesla shares shooting up was the announcement by Hertz that it’s buying 100,000 Tesla cars to add to its rental fleet throughout 2022. The deal is reported to bring in a whopping $4.2bn for Tesla and is the largest ever purchase of electric vehicles, according to Bloomberg.
The share price was also helped by increasing European sales and increasingly bullish analyst estimates. In addition to this, the Model 3 sedan became the first fully electric vehicle in history to top new car sales in September in Europe.
Hertz has said that deliveries of the electric vehicles are already under way, which seems like great news for both companies. However, Musk then took to Twitter emphasising no contract had been signed and that vehicles would be sold for the same margin as to consumers. This pushed Tesla shares higher still, peaking at $1,229.
The shares have since fallen over 17%. A big reason for this is another tweet by Musk, where he informally asked his Twitter followers if he should sell his Tesla stock to satisfy tax obligations. The outcome was a near-$4bn sale of over 3.5mn shares. Tesla shares slumped 15% following the news.
Another spike?
It seems that Musk has the power to easily influence Tesla shares from his Twitter account. Therefore, in the immediate future, I don’t see why we couldn’t see another spike up above 1,000p. However, this effect seems to work both ways, so we could see a drop of equal magnitude.
Longer term, it’s worth noting that Tesla released some excellent Q3 results in October. Automotive revenues were up 58% year-on-year, with EBITDA up 77% to £3.2bn. This is great news for shareholders, as is the fact that Tesla is now turning over comfortable profits after years of being a loss-making firm.
While this growth is great for Tesla shares, demand still far outweighs supply. In the case of Hertz, this means higher sales margins.However, more broadly, this could place a lid on Tesla’s growth. The global semiconductor shortage is still causing issues, and the pandemic is still hindering the industry’s recovery.
In addition to this, the electric vehicle market is heating up with much more competition. Although Tesla is a current industry leader, household automotive names like Ford and General Motors have set aside billions for EV R&D over the coming years.
Overall, I think that Tesla shares could easily jump back above 1,000p in the last few weeks of November. This is due to its past ups and downs plus its impressive growth. However, I won’t be adding this stock to my portfolio, as the price moves are too volatile for my liking.
Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Twitter. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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