Analyst says Tesla's stock price high 'on power of the narrative'

The electric car maker has managed to add about $48bn (of market capitalisation this year

Tesla and one of its more established Chinese challengers, NIO, have gained buyers in a potential sign of long-term strength for the industry. AP

Tesla’s cars may run on batteries, but its stock price is fueled by “the power of the narrative”, according to an analyst with a sell rating on the shares.

In a report Thursday, Joe Spak of RBC Capital Markets marveled at how the electric-car maker has managed to add about $48 billion (Dh176.3 trillion) of market capitalisation by ginning up excitement about its quarterly vehicle deliveries.

On June 24, Tesla’s investor-relations team shared a collection of delivery estimates that found analysts on average were expecting the company to hand over about 70,300 vehicles to customers.

The market recognised this as a low bar, triggering gains that were further supported by two bullish emails chief executive Elon Musk sent to employees that leaked to several media outlets.

By the time Tesla reported 90,650 deliveries on Thursday, its shares had surged about 27 per cent over the course of seven trading days, outpacing the S&P 500’s roughly 3 per cent gain. The company added more market cap in that span than General Motors or Ford Motor’s entire valuations.

“That, is remarkable,” Mr Spak wrote. He estimates Tesla topped consensus delivery estimates by the equivalent of about $1bn of revenue, meaning investors are valuing the beat at about 47.5 times sales.