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Aramco and Tesla Redefine What Stock Price Means

Aramco and Tesla Redefine What Stock Price Means

Saudi Aramco and Tesla have more than just their industry leadership in common. 

Both giants have uniquely large and enthusiastic fan bases that take their stock prices beyond the traditional factors for calculating valuation.

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Looking Past the Numbers

Following Aramco’s record breaking initial public offering (I.P.O.), it rapidly moved itself into a category in which Tesla has been leading the way.  This is an interesting turn of events, considering that Aramco is an oil giant and Tesla’s very existence is based on shirking dependence on fossil fuels.

Still, just as Tesla C.E.O. Elon Musk is known to simply point to the company’s stock price to justify some of his more radical moves, Aramco appears to be capable of the exact same thing.  Regardless of the traditional – and even non-traditional – factors analysts have taken into account to calculate valuation, Aramco has managed to leave them all behind.

Putting a Price on Aramco

Ahead of the oil giant’s I.P.O., Crown Prince Mohammed Bin Salman valued Aramco at $2 trillion using the company’s own financial data.  Investors across much of the rest of the world balked at this figure.  In fact, the hesitation was substantial enough that the Crown prince took a new tack and withdrew his intention to list on a broader international market, staying domestic and regional instead.

That said, despite the fact that most analysts valued the company at around $1.5 trillion to $1.75 trillion, on its second day of trading, Aramco’s stock price brought it up beyond the valuation the Crown prince had set.
It became rapidly clear that Aramco isn’t your average stock – not that anyone had expected it to be completely typical.  Like Tesla, the company has its own unique brand, swagger, and astounding fan base that take its value beyond the normal factors.

When Oil and Electric Vehicles Run on the Same Fuel

Though the companies appear to be polar opposites in terms of what they represent, they have many core components in common. For instance, Crown Prince Mohammed Bin Salman and Elon Musk are both using their companies to break away from the status quo.  In fact, they are both trying to rise above the current and future challenges built right into their industries and economies.

The Crown prince is doing so by using Aramco as a move to secure the future of his economy, which is currently heavily oil-dependent. Though thriving today, the global shift away from fossil fuels makes it clear that there is a stale date for oil-based wealth. Musk, on the other hand, is leading a company defined by carving its own path. For instance, it is the leader in electric vehicles in an ecosystem in which Tesla is essentially building the mainstream market from the ground up. This includes everything from the vehicles to the demand for them and even the charging station infrastructure.

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The very nature of those stocks, and the fact that they are based on an undiscovered country, has created such unique devotion among their large numbers of fans. As a result, their stock prices and, therefore, their valuations aren’t merely a matter of the usual figures.

Can These Stock Prices Continue?

There is a nearly meta factor providing the final element in the calculation of the Tesla and Aramco stock prices.  Indeed, many of the traditional figures still apply.  However, additional components also play a role.

Who could forget the way Tesla’s stock price was impacted when Musk tweeted about $420, a joke about getting high, but that was taken quite literally by investors and sent the stock skyward? Equally, there was the “funding secured” component of that tweet that eventually brought catastrophe, albeit a temporary one.

Aramco’s goal of $2 trillion seemed unachievable to investors before the I.P.O., but it still managed to pass it temporarily. Now, analysts are seeing more potential than they may have initially thought possible.

What investors are now trying to determine is whether these types of atypical influences are sustainable. So far, so good.  Despite a few wobbles here and there, the non-traditional Tesla and Aramco stock prices look to be proving themselves durable. At least, they are according to those traditional calculation factors.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.