Tesla shares are 275% high in 2020: understand why and how to invest

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Synonymous with disruption and innovation, Tesla is one of the most prominent companies in recent months in the international financial market. 

In 2020 alone, Tesla’s shares accumulated a 275% increase, which transformed the US automaker, which focuses its efforts on electric cars and renewable energy, into the most valuable automotive brand on the planet.

The company is run by Elon Musk, considered by many to be the greatest genius and visionary of his generation. 

He is also the founder and CEO of SpaceX, a company created to make aerospace transport more accessible, with the aim of colonising Mars. This year, he became the first company to send a manned spacecraft into space.

From artificial intelligence to global warming reduction, Tesla is one of the most promising and talked about companies in the world. 

But do you know what is behind this recent appreciation?

In general, investors are increasingly optimistic that the company will be able to make its operation truly sustainable, with increased vehicle production capacity and profit generation.

Until recently, all efforts were focused on the creation of new technologies, innovating and promoting research related to energy storage capacity, efficiency and vehicle autonomy. 

The market lacked a signal that the company is capable of becoming a profitable player, which generates value for shareholders on a constant basis.

This has been changing over the past few months and the release of the second quarter results this Wednesday evening may be the final proof of what the market was expecting: the company reported gains for the fourth quarter in a row, making it eligible to even compose the S&P 500 index.

In this article, you will understand some of the reasons why Tesla’s shares have appreciated so much in recent months, you will understand its lines of business and the expectations that the market has of the company.

In addition, we will detail Tesla’s earnings release and how it may affect the stock in the coming months.

Together, we will discuss the following topics.

What does Tesla do and what is his purpose?

Founded in 2003 by engineers Martin Eberhard and Marc Tarpennin, Tesla is an American company that, according to its official website, is dedicated to accelerating the global transition to sustainable energy.

Ambitious, do you agree?

Focusing primarily on electric vehicles and renewable energy, Tesla claims to have broken down several technological barriers in its history in order to offer high-performance electric cars. 

Today, Tesla’s electric vehicles are the best selling on the planet, and the company also claims that the three models currently sold (Model S, Model X and Model 3) are the most efficient and safest cars in the world.

But behind these high-performance electric sports cars there is a much greater purpose, as Elon Musk, the company’s CEO, explained in the company’s Master Plan, published in 2006: to enable an economy based on photovoltaic energy, generated by solar panels. “I believe that this is the main, but not the only, sustainable solution,” wrote Musk.

To do this, Musk used a business model inspired by the technology industry, in which each stage supports the next.

Will we understand it better?

Tesla is a car manufacturer with technological DNA

In his Master Plan, Musk writes that Tesla’s long-term goal is to build a wide range of electric cars, including entry-level models, at affordable prices, with a focus on families. 

But to do that, the company needed to start with a high-performance, higher-priced sports car. The goal was for sales of this vehicle, dubbed the Tesla Roadster, to allow for technological optimization to result in a more affordable car, and so on.

“Tesla’s strategy is to enter the highest point of the market, where customers are prepared to pay a premium for the vehicle and then move down as quickly as possible to the other segments, to increase unit volume and lower prices with each model,” Musk said. 

The first Tesla car, therefore, was the Roadster, which could reach 100 km / h in just 3.9 seconds.

Later, I would justify the choice of a sports car by arguing that customers would agree to pay more for a sports car, if they knew they were helping to finance sustainable energy projects and technological advances, but it would be much more difficult to do so by selling basic cars at higher costs.

The company’s original Master Plan, therefore, was summarized in four easy-to-understand themes:

Build a sports car;

  • Use that money to produce a more affordable car;
  • Use that money to produce an even more affordable car;

In doing so, we also offer options for generating electricity with zero emissions.

Ten years later, in 2016, Musk drafted a new Master Plan, commenting on the results obtained so far and setting new goals for the following years.

Musk explained that the aim of the original Master Plan was to be transparent and to show that Tesla’s actions in the following years would not be random. There would be consistency in the name of the larger objective. On the occasion, Musk reiterated the need for the planet to achieve a sustainable energy-based economy. 

“Or we will run out of fossil fuels to burn and civilization will collapse. Given that we must withdraw fossil fuels anyway and that virtually all scientists agree that dramatically increasing atmospheric carbon levels is crazy, the sooner we achieve sustainability, the better,” he wrote.

To make possible a future where the economy is sustained by photovoltaic energy, Musk summarized Tesla’s next steps in four points:

  • Create rooftop solar panels with fully integrated storage and batteries;
  • Expand the line of electrical products to serve all major segments;
  • Develop autonomous driving resources ten times safer than manuals, through mass fleet learning (Tesla vehicles map the roads);
  • Allow your car to generate money while you are not using it.

As you can see, the focus now is on building autonomous cars, where you can sleep, read, study or work, while you travel to your destination. Once there, it will still be possible to borrow the car so that it becomes part of the road network, generating income while others use it.

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