What drives Tesla's stock up and down ? Lot more than just Elon Musk's tweets.

A brief history of TESLA stock and exploring the reasons behind the company's notoriously volatile stock price.

TESLA was founded less than two decades ago. In automotive industry that is very young. But despite that, TESLA is valued so much higher than the well established giants of the automotive industry. Adding to that, the company's stock is notoriously volatile often gaining and losing by significant margin on daily basis. This naturally raises the question of why TESLA's stock is valued so high and what drives its stock price up and down so drastically ? This article attempts to answer these questions by exploring the history of TESLA stock.

We begin our analysis by comparing companies listed on NASDAQ Top 100 and illustrating how the TESLA stock is placed so unqiuely. Keep scrolling to learn more.

Tesla Stock: A Wild ride

Each circle denotes a company listed in NASDAQ Top 100. The circles can be identified by the associated company stock symbols

Color of the companies are changed based on the sectors they operate in.

Arranging companies on the horizontal axis based on their stock price. Companies with higher stock price are placed on the right

Changing the size of the circles based on the market capitalisation of companies

Let us now place the companies on vertical axis based on their Annualised Volatility. As defined in Investopedia, Volatility is a statistical measure of the dispersion of returns for a stock. Higher the volatility, higher is the variation in the company stock price

Let us now consider only those companies operating in Auto-Manufacturing industry. and also include prominent auto companies trading on platforms other than NASDAQ

Despite being founded less than two decades ago and turning profitable only recently, notice the very high valuation of Tesla compared to other well established automotive giants.

So what makes TESLA special ? Why is it valued so highly and why does its stock price fluctuate so much ?

The automotive industry has always been a notoriously hard sector for any new company to break through. This is evident with almost every top auto manufacturer today being in operation since several decades. The ever so growing list of vastly diverse set of mechanical and electronic parts, supply chain required to procure all such parts, combined with the excruciatingly complex task of maintaining the production line makes the barrier very high for new entrants.

Although there had been plenty of attempts by startups to get into electric car industry, TESLA was different in a lot of aspects even in its early days. Based in Palo Alto, the company was true to its Silicon Valley culture of experimenting with new things, failing early and learning quickly from those failures. This is in strong contrast to most other auto companies which are often constrained by age old legacy systems. After the first few years in existence, TESLA also had a superstar CEO in Elon Musk who had already involved in several successful Silicon Valley startups. Further the open letter in early days envisioning TESLA's goals for the future was perhaps what made it the most distinct compared to its peers. The letter described how TESLA would begin by selling few high end sports car, then use that money to make a slightly more affordable car and then use money from that to eventually build a very affordable car for masses.

The company started making news in 2013 when it reported its first quarterly profit. TESLA has always been projected as a growth company. And despite its significantly lower sales figures compared to other major auto manufacturers, investors and Wall Street analysts have always been positive regarding its earning potential particularly with the growing emphasis on electric cars in the recent years. But as expected for any new automotive company, TESLA has also been plagued by endless production delays, missing multiple financial targets thereby leading to revised valuations. This invariably leads to fluctuations in the stock price. For a company which just started turning profitable combined with its sky high valuations based primarily on its projected future success and being one of the most shorted stocks in the history, together all these factors make the TESLA stock very volatile thereby explaining its high annualized volatility.

Explore what drives Tesla stock up and down

This interactive graphic aids in visualizing the daily percentage changes in TESLA stock price. Further it also lets you select days with most gains, most loss and the days when CEO Elon Musk's tweets influenced the stock price. Each square corresponds to a trading day with the color denoting the daily percentage change. Green and red boxes are days when the stock price went up and down significantly respectively.

Select from one of the dropdowns to explore why the stock went up or down on that given day

Daily changes in TESLA stock price
Click on below buttons to view days with most rise, fall and also days with Elon's market moving tweets.
Daily changes in stock price (%)

Exploring the previous section naturally leads to the question of comparing the various reasons that drove the stock wildly in both up and down directions. So here is a compilation of the the days when the stock gained or lost the most along with the percentage changes for the day and the reason for gain or fall.

TESLA stock's biggest gains and falls compared to Elon's market moving tweets
Days with most rise     Elon's tweets     Days with most fall

Unlike for most other companies, TESLA's superstar CEO Elon Musk does seem to possess unusually high influence of company's stock price. But in reality, what really drives TESLA stock up and down is the company's profitability, financials, quarterly performances and constantly revised valuations by Wall Street experts.

A Brief History of TESLA Stock

In the final section of this article, let us go through the brief history of TESLA stock and witness the numerous ups and downs the company has had since reporting its first quarterly profit in 2013.

TESLA has been one of the top-performing yet very volatile stocks ever since its IPO. What exactly drives it up and down ? Here's a brief history of how the TESLA stock has evolved over the years.

Tesla was founded in July 2003, by engineers Martin Eberhard and Marc Tarpenning, under the name Tesla Motors. Elon Musk led the Series A round of investment in February 2004, joining Tesla's board of directors as its chairman.

In April 2013, Tesla reported its first quarterly profit since the company went public. The stock price responded promptly and went from $40 in April to $190 by September 2013.

In Nov 2013, Tesla's stock fell more than 20 percent, following news of a third Model S fire. But during December, TSLA finally got some momentum following reports that the Model S was cleared of any defect by the German Federal Motor Transport Authority.

Tesla raised $2 billion from bonds for building GigaFactory and $738 million in stock for the Model X in 2014 and 2015 respectively. Tesla reported a net loss of $74 million during 2013 and a net loss of $294 million during 2014. The stock hovered around the $200 mark.

In Feb 2016, Tesla shares reached their lowest closing price in two years following the 2015 earnings report indicating a loss of $888 million. During 2016, Tesla unveiled Model 3, raised $1.46 billion in stock and agreed to acquire SolarCity for $2.6 billion in stock.

In April 2017, Tesla issued a worldwide recall of 70% of its vehicles it sold in 2016 due to faulty parking brakes. In July 2017, Tesla stock crashes on disappointing news about missed deliveries for its Model X and Model S. The company loses more than $12 billion.

In Aug 2018, CEO Musk was sued by the U.S. SEC for the tweet claiming that funding had been secured for taking Tesla private. Musk later settled the charges with the SEC. Model S with global sales of 250,000 units, ranked as the world's best selling plug-in electric car.

In July 2019, Tesla shares suffered a steep drop after the electric car maker reported a wider than expected loss and disappointing revenue and announced the departure of co-founder and CTO JB Straubel from the executive ranks.

But in Oct 2019, Tesla turned in an unexpectedly profitable third-quarter and better than anticipated progress toward getting its Shanghai factory operational. It defied Wall Street Analyst forecasts that called for a quarterly loss.

In early 2020, shares soared to record levels reaching $900 with market cap exceeding $100 Billion. This was spurred by positive ratings by Argus Research and Morgan Stanley following Tesla’s strong fourth-quarter financials, which exceeded Wall Street’s expectations.

The steep rise was followed by a dramatic fall due to the coronavirus outbreak. The company delayed deliveries of Model 3 vehicles in China and had to shut down its Fremont factory due to the pandemic.

Through this article, we explored what makes the TESLA stock so volatile and the factors behind its wild fluctuations over the years. With its ventures into battery packs, energy storage devices, electric trucks, superchargers, infrastructure for supporting electric vehicles, the company has grown into lot more than just being an electric car manufacturer. The enormous potential in the coming years has led to incredibly high valuations of the company. Despite all these, the company has only recently started turning profitable and until the sales figures go up significantly, comparable to other auto-industry giants, the stock price will continue to be volatile owing to short term earnings performance, missed financials targets prompting revised estimates by Wall Street. And yes sometimes, the stock price gets influenced by the tweets from its hugely popular CEO but we now know that unlike what is often portrayed in the media, barring a couple of Musk's tweets, the rest have barely affected the stock price of the company.

So the next time TESLA Stock crashes, don't just blame Elon. There's more to it.