Why Tesla is so strong in a pandemic

Many investors bet on the future growth potential of companies. The case in point is Tesla as its shares rallied 743% in 2020. The market cap of the U.S. electric car company (about 727 trillion won) was higher than the combined market values of nine carmakers, including Volkswagen, Toyota, Nissan, Hyundai Motor, General Motors (GM), Ford, Honda, Fiat Chrysler, and Peugeot as of the end of last year. Tesla’s “present value” cannot be that much. While Toyota sold 4.16 million units in the first half of last year alone, Tesla sold 500,000 units last year.

“Tesla updated software in time for Christmas, allowing drivers to customize their horn sound. You can even play the popular bike song outside the car through external speakers. Tesla offers something beyond conventional vehicles, which makes me believe in its future,” said a Tesla shareholder here.

Avid Tesla fans and analysts are significantly divided on the future of Tesla. The analyst price target for Tesla stock varies widely even among stock companies. Tesla’s share price stood at 705 dollars at the end of last year. JP Morgan had a 90 dollar one-year price target on Tesla’s shares, saying they are “dramatically overvalued.” The carmaker got 780 dollar price target from Goldman Sachs and 339 dollars from RBC Capital Markets. This suggests that no one is sure about the real value of Tesla.

Another star on the stock market last year was Apple. While Tesla shares had the biggest rise, Apple had the biggest rise in market cap. It jumped a whopping 1 trillion dollars in a year, which is the amount equivalent to South Korea’s annual trade volume. Apple not only has avid fans like Tesla but it has also gained consumers’ confidence in the digital world in the past 10 years as a “trustworthy company.” Samsung Electronics share have soared thanks to the strong backing of individual investors called, “ant warriors.” The South Korean tech giant ranked 10th in a new ranking published by the Financial Times, joining the top 10 global companies, which had the biggest percentage gains in market value in 2020, following Apple, Amazon, Tesla, Microsoft (MS), Alphabet (Google), Tencent, TSMC, Facebook, and Nvidia.

Given the growth and abundant liquidity of tech companies, such as Tesla and Apple, it is still surprising to see the rise of their shares since it draws a stark contrast to the real economy. Stores in Myeongdong, Seoul and the Times Square in New York are closing after one another. Large retail and fashion companies in the U.S., including Neiman Marcus and J. Crew, filed for bankruptcy. Many have sensed the end of an era during the pandemic and maybe this has made them to put more value on future hopes than reality.

People will continue to bet on hopes in any field in the New Year. A feeling of deficiency in reality invites a desire for uncertain future.


Hyoun-Soo Kim kimhs@donga.com