October jumpstarted electric vehicle stocks, Tesla leads the way
October was a big month for electric vehicles (EV) stocks — with Tesla in the lead — which is up 52% in the past month.
Other pre-revenue EV upstarts are also seeing similar moves: Lucid (NASDAQ:LCID) is up 47% and Arrival (NASDAQ:ARVL) is up 30% in the past month.
What’s the big deal? Last week, Tesla jumped from the purchase of 100K vehicles by Hertz — but a surge in call option purchases sent TSLA even higher in the following days.
- The options traders which sold the calls had to buy Tesla’s stock to hedge their positions.
- The complex relationship between stocks and options led to further increases in Tesla’s stock.
The entire electric vehicle industry is rising alongside the start of the COP26, the 2021 United Nations Climate Change Conference — a two-week event that kicked off on Oct 31.
The Tesla advantage: Late Oct, Morgan Stanley released a report with Tesla’s price targets: bear case ($500), base case ($1,200) and bull case ($1,600). This assumes:
- Growing profitability — driven by Tesla’s manufacturing advantages and high-margin software business.
- Strong sales growth — with sales forecasted to grow from $51B to $436B by 2030.
Tesla is the most profitable mass car company and MS expects profitability to expand — driven by what may be its biggest advantage — an early head start and focus on manufacturing.
By redesigning the whole manufacturing process from scratch, Tesla implemented modern manufacturing techniques with an EV first focus — lowering costs.
The skeptics: Investors could also see this as a sign that the EV industry is overheated on relatively little news.
No significant breakthroughs have come from this year’s COP26 conference yet — and nations have made little progress on past climate change pledges.