Tesla Motors Inc (NASDAQ:TSLA) shares have been the talk of Wall Street for months, and that’s unlikely to change soon. The company’s market capitalization hit $20 billion on Monday for the first time.
Jim Cramer of CNBC’s Mad Money called Tesla a cult stock earlier this year and said he doesn’t usually comment on cult stocks. However, on Monday he offered 10 reasons he thinks Tesla has surged this year. And the bottom line? There’s “too much good for the market to ignore.”
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Tesla beats expectations
Cramer noted that all of the excitement surrounding Tesla Motors Inc (NASDAQ:TSLA) started earlier this year when it defied expectations for a loss and posted a $15 million profit. He also said that while most of Wall Street thought there was little demand for Tesla’s vehicles, the company exceeded even its own production targets. In fact, demand was so high that the company expanded its stores by almost 50 percent by the end of the year, and Tesla is now moving into Europe and Asia.
And drivers like the company’s vehicles so much that 25 percent of test drives result in a purchase, according to statistics kept by the automaker. This added some confidence to Wall Street. Tesla Motors Inc (NASDAQ:TSLA) even began offering financing so that a greater number of consumers would be able to afford its pricy sedan.
Tesla’s cost controls better than expected
And then there were theories about how much the automaker was spending to make its vehicles. Investors thought the company was spending more and earning less, but it turned out to be the opposite. Gross margins have climbed from 8 to 17 percent, far behind expectations.
Investors also labor and raw material costs were creating a problem for the company, but material costs have fallen 20 percent since the company slashed the amount of time it takes to make one of its vehicles.
Tesla’s got plenty of cash
Cramer also points out that Tesla will drop $200 million more to build out its production facility using just the cash it already has. And there are no plans to offer more stock, which has been unfortunate for the many investors who are shorting it.
Tesla has done what others in a similar position would do
According to Cramer, any other stock with the same characteristics as Tesla would have almost quintupled in just a few months.
“Tesla’s market cap got to $20 billion because there simply wasn’t enough stock to go around to handle a brand new profitable growth story with no cash needs and a level of demand that can’t be met even as gross margins are going higher,” Cramer said.