did not act like stocks of the fast growing leader in the fast growing high tech market for electric vehicles on Monday. Interest rates rose and technology stocks fell, but Tesla continued its upward trend and acted more like a traditional auto company.
The yield on 10-year US Treasuries rose from 1.45% on Monday to 1.48%. It was a small move, however rising bond yields Always important to high-valued tech stocks as it diminishes the current value of profits these companies are expected to generate in the future. Higher returns tend to have a detrimental effect on tech stocks’ valuations, which has also had an impact on the broader market.
Home to highly rated tech stocks, fell about 0.5%. the
Dow Jones industry average,
with lots of old economy stocks, up 0.2%. the
closed by around 0.3%.
Like the Dow Index, auto stocks have done well with rising returns. Companies like
(Ticker: GM) and
(F) have significant cash flows today and are value investors’ favorites. GM stock rose about 1.9% on Monday. Ford shares gained around 2.8%.
It all made a lot of sense and was in line with the historical pattern.
Oddly enough, Tesla’s stock (TSLA), along with the other two automakers, rose 2.3% to close at $ 791.36 per share. It was Tesla’s highest closing price since February 17, when it closed at $ 798.15, according to Dow Jones Market Data.
Tesla is not valued like a traditional automaker. It is usually difficult when interest rates go up. Stocks trade for roughly 100 times estimated earnings for 2022. Ford and GM shares trade at single-digit price-earnings ratios.
And in February, as rates rose, Tesla stock fell about 15% for the month. Ford stock was up 11% while GM stock was up 1%.
Monday’s gain is unlikely to come because investors decided Tesla should be treated like an auto stock. Something else has to happen. The most likely expectation is that Tesla investors expect strong shipments for the third quarter.
The numbers will be announced in early October and possibly later this week. Analysts expect around 221,000 vehicles to be delivered in the third quarter compared to around 201,000 in the second quarter.
Every new quarter tends to be a delivery record for Tesla. The company’s aim is to increase deliveries by an average of more than 50% per year in the foreseeable future.
Write to Al Root at [email protected]