How Tesla Made $ 175 Billion In Value From Hertz’s $ 4 Billion Order
Tesla’s successful order from Hertz again boosted the electric vehicle pioneer’s stock on Tuesday, as well as its market capitalization. Today, Tesla is valued at over $ 1,000 billion, an increase of $ 175 billion in about 24 hours, for a $ 4 billion deal.
It sounds like a lot, but the movement makes a lot of sense.
Let’s break it down: On Monday, Tesla shares (ticker: TSLA) rose 12.7%, or $ 115. They were up another $ 54.74, or 5.3%, in Tuesday’s trading. The $ 54.74 jump is equivalent to about $ 55 billion, just 10 billion less than
‘s (F) market capitalization of $ 65 billion. Hertz (HTZZ), which emerged from Chapter 11 bankruptcy protection not too long ago, is valued at $ 13 billion, according to Bloomberg.
To fully understand the value Tesla earned through the Hertz deal, consider this: Tesla’s $ 1,027 trillion worth is over $ 983.9 billion in combined market cap of the nine largest automakers by market capitalization – Toyota Motor (TM), Volkswagen (VOW3.Germany), BYD (1211.Hong Kong), Daimler AG (DAI.Germany), General Motors (GM), Great Wall Motor (2333.Hong Kong), NIO ( NIO), BMW (
Germany) and Ford, according to Dow Jones Market
So how can a $ 4 billion order have such a big impact?
One factor: additional income. “It’s 13% more for the winnings. The calculation of 100,000 cars is one dollar per share  benefits, ”said Gary Black, Managing Partner of
Active Future Fund ETF
Wall Street is around $ 8 in 2022 earnings per share. The potential rise in profits has been behind most of the rise in Tesla stock over the past two days – the stock has risen nearly 20% so far this week.
“It’s more than Hertz,” said Ross Gerber, CEO of Gerber Kawasaki, which manages approximately $ 2 billion in assets. “Tesla has never announced a fleet order before… It is a symbol of something more important.”
Gerber believes other car rental companies will turn to electric vehicles, not only because they meet environmental goals and are cheaper to operate, but because they retain their value better than gasoline-powered cars. Car rental companies sell their used vehicles.
“It’s genius for Hertz, then there’s Avis and then everyone,” Gerber added.
Gerber’s tote category of “everyone” might include ridesharing companies such as
(UBER). The financial adviser believes Uber will want to help its drivers rent electric vehicles. Uber has already announced its intention to be “zero emissions” by 2030.
Gerber and Black are both Tesla Bulls. They and their bearish counterparts will continue to debate whether stock movements make sense. But the movements of the company are more difficult to discuss. CEO Elon Musk is executing his business plan well. Growth is accelerating and Tesla’s lead over its competitors is increasing.
Fleet sales like the Hertz order, for example, are a whole new source of volume. And Tesla’s automotive gross profit margins topped 30% in the third quarter, which is better than traditional giants like Volkswagen, Toyota and BMW.
Write to Al Root at [email protected]