Carmaker is world’s second most valuable despite never having made an annual profit

Tesla shares have soared 40% in two days, after one US analyst predicted the electric carmaker could transform global transport and that its market value could soar to $1.3tn (£1tn) in less than five years.

Shares in the 17-year-old California company rose by 17% to $912 a share on Tuesday, giving Tesla a market value of $164bn – more than the $104bn combined value of Detroit’s big three: General Motors, Ford and Fiat Chrysler.

The share price surge on Tuesday came on top of a near-20% rise in the stock on Monday. It has now more than doubled since December, as the company has reported stronger-than-expected sales and analysts predict it will streak away from traditional car companies in the development of electric vehicles.

The extraordinary spike in the company’s value sets Elon Musk, Tesla’s maverick founder and chief executive, further on the path to collect up to $50bn in the largest corporate pay deal ever struck. Musk, who is already the world’s 22nd-richest person with a $41bn fortune, will collect the “staggering” bonus if Tesla becomes a $650bn company by 2028.

Tesla is now the world’s second most valuable car company behind Japan’s Toyota, which has a market capitalisation of $227bn. Tesla’s huge valuation is despite it selling just 367,200 cars last year, compared with Toyota’s 10.7m sales. Tesla has never made an annual profit, and lost $862m in 2019.

Despite this, bullish financial analysts reckon Tesla’s value will surge higher still. They expect the company to dominate the electric car market as global governments outlaw the sale of polluting cars. The UK on Tuesday announced that it would ban the sale of petrol, diesel and hybrid cars by 2035. Tesla is also expected to make billions from fleets of self-driving autonomous taxis.

Catherine Wood, the chief investment officer of ARK Invest, said buying Tesla shares should be a “no-brainer”. ARK, which has long been one of the most bullish on Tesla’s potential, said it expected the shares would rise to $7,000 by 2024, which would give the firm a market capitalisation of $1.3tn. That would put Tesla behind only Apple (currently worth $1.4tn) and Microsoft ($1.37tn) among the world’s biggest companies.

According to ARK, the possibilities could be even greater: its $7,000-a-share price target is only a “base case”. The firm’s “bull case” predicts a price as high as $15,000. In the firm’s worst “bear case” scenario the shares are still expected to rise to $1,500.

However, other analysts are highly sceptical of ARK’s calculations and projections. “I just can’t believe this freaking stock. It’s insane,” the Roth Capital analyst Craig Irwin told CNBC on Tuesday. “This is a big separation from those of us who like to pull out the calculators and look at reality.”

Wood told Barron’s Market Brief: “The electric vehicle is going to drop below the price of a gas-powered vehicle, like-for-like, within the next 18 months to two years, and then will continue to fall. So it’s going to be a no-brainer. ”

ARK said it expects electric vehicles to account for about one-third of all car sales within the next five years, and Tesla would dominate the market. In its worst-case scenario Tesla is expected to sell 3.2m cars a year by 2024, and 7.1m in the best case.

James Anderson, a partner at Baillie Gifford, the Edinburgh-based fund manager that is one of Tesla’s largest outside investors, said: “We’re thrilled with their progress, delighted that our patience seems to have paid off – and, far from least, extremely happy that electric is beating carbon.”

Anderson had been mocked by some when a year ago he predicted: “There is now quite a large and growing possibility that Tesla will be the most valuable company in the world.”

Gene Munster, a managing partner of the venture capital firm Loup Ventures, said: “The thesis for Tesla’s business miracle is rooted in the handful of years that the company operated with effectively no competition.

“Tesla has nearly a decade head start in EVs [electric vehicles] as other automakers under-invested in the space,” he wrote in a research note.

However, other analysts fear that Tesla has been overvalued in a rush of optimism for a green electric car future. JP Morgan analysts said: “We continue to urge caution with regard to Tesla shares, which appear highly overvalued based on our understanding of the fundamentals.” The Wall Street bank’s target price for the end of the year is $240.

Many in the financial markets are also hoping to profit from a fall in the company’s share price by short-selling the stock. According to data analysts S3 Partners, 18% of Tesla’s shares are controlled by short-sellers – more than any other US stock.

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Tesla last week reported a $105m profit for the fourth quarter and said it expected to increase sales by more than a third this year. The Silicon Valley carmaker said it expected the first deliveries of its next car, the Model Y sports utility vehicle, before April. The company had previously targeted production to begin by the summer.

Musk, who owns 20% of Tesla’s shares, said last week that the Model Y will have 315 miles (507km) of range, which would far outstrip its competitors the Audi e-tron and Porsche Taycan, which have estimated ranges of just over 200 miles.

The Volkswagen chief executive, Herbert Diess, last month told his top lieutenants that cars will “become the most important mobile device”. “If we see that, then we also understand why Tesla is so valuable from the view of analysts.”