Tesla is the newest member of the trillion-dollar club, with the lowest revenue.
The electric vehicle maker's stock has soared through multiple milestones in recent weeks, including surpassing a rarefied $1 trillion (€860 billion) in market value on Monday.
This boosted investor confidence even more, as they banked on Tesla's ability to increase as electric vehicles become more common and eventually replace gasoline-powered vehicles.
Unlike its trillion-dollar contemporaries, though, Tesla's valuation reached that level before its revenue reached $50 billion.
Even though Tesla is the fifth-largest business on the S&P 500 Index in terms of market capitalization, it ranks 89th annual sales. Capital One Financial Corp., which earned $31.6 billion in revenue last year versus $31.5 billion for Tesla and is valued at $75 billion, comes in first. Walmart Inc. has the highest income on the index, at 559.2 billion dollars, dwarfing its valuation of $417 billion.
"Looking at Tesla's revenue for the next year or so, valuation appears stretched," said Wedbush analyst Daniel Ives. Mr. Ives' $1,100 price estimate for Tesla, on the other hand, reflects the company's potential to take a large share of the EV market over the next five to ten years, as well as high margins, according to the analyst.
Hertz Global Holdings, a car rental firm, placed an order for 100,000 Tesla vehicles, signaling that EVs are here to stay and giving bulls confidence that Tesla's sky-high value is also sustainable.
"Wall Street is starting to believe the skyrocketing move in Tesla's stock price is nowhere near over," Oanda analyst Edward Moya wrote on Monday. "Tesla has a massive lead in the EV space and improving growth potential as the US, European, and Asian markets for electric cars grow."
After finishing up 13 percent on Monday, Tesla stock soared as much as 6.1 percent yesterday. The corporation is currently valued at roughly $1.1 trillion.
Tesla's most recent yearly revenue is far smaller than Facebook's, which broke into the trillion-dollar club earlier this year before dropping back below it. Tesla also has a high price-to-sales multiple as a result of this.
The shares of the electric vehicle manufacturer are currently selling at 21 times sales, compared to eight times for Facebook and 6.6 times for the NYSE FANG+ Index.
Tesla also has a significant debt load, placing it 162nd in terms of total debt in 2020. As of September 30, Tesla had a total debt of $10.1 billion for the current fiscal year.
"For years, looking at current Tesla valuation multiples and market share has been a loser's game," said Matt Weller, worldwide head of market research at Forex.com & City Index. However, Mr. Weller predicted that "investors will start to question whether the company will be able to deliver on its massive promises" at some time, most likely if additional competitors enter the market and interest rates begin to increase.
