Why Is Tesla Stock Going Up?

Tesla stock (TSLA) rose 2% on Friday, marking the eighth consecutive session of gains and erasing its year-to-date losses. But why is Tesla Stock going up, given this huge rally in the last month?

The recent surge has caught the attention of investors and analysts alike, as the stock’s remarkable turnaround signals renewed optimism in the company’s future.

Why Is Tesla Stock Going Up

A Quick Turnaround

After a 37% rally over the past eight sessions and a 43% rise in the last month, Tesla’s stock is now in positive territory for 2024.

This is a significant reversal from mid-April when the stock had fallen as much as 40% year-to-date. In comparison, the S&P 500 has only risen a modest 4% over the past month, highlighting Tesla’s impressive performance.

Quarterly Deliveries Beat Expectations

One of the key drivers behind Tesla’s recent stock surge is its better-than-expected quarterly delivery numbers.

The company reported strong production and delivery results, which boosted investor confidence.

Tesla’s ability to consistently meet and exceed delivery targets is crucial for maintaining its competitive edge in the electric vehicle (EV) market.

Growth in Energy Storage Business

In addition to its automotive division, Tesla’s energy storage business is gaining significant traction.

This segment, which includes products like the Powerwall and Megapack, has been growing rapidly and contributing to the company’s overall revenue.

Morgan Stanley’s Adam Jonas highlighted this in a recent note, emphasizing that Tesla is not just an auto company but a leader in energy storage as well.

Inclusion in China’s Government Purchase List

Another positive development for Tesla came with the inclusion of its locally built cars in China’s provincial government purchase list.

Specifically, Tesla’s Model Y was added to the catalog for Jiangsu province, allowing government workers to purchase the vehicle as a service car.

This move is expected to boost Tesla’s sales in China, a critical market for the company.

Challenges and Concerns

Competition and Demand

Despite the recent successes, Tesla faces stiff competition from Chinese EV manufacturers and a potential decline in demand in the US.

To address these challenges, the company announced a plan to cut more than 10% of its global workforce earlier this year.

This cost-cutting measure is seen as a response to the increasingly competitive landscape and potential headwinds in the EV market.

CEO’s Caution on Near-Term Demand

During Tesla’s recent shareholder meeting, CEO Elon Musk acknowledged the near-term challenges facing the company.

He noted that demand and sales might struggle as the industry transitions. Barclays senior equity research analyst Dan Levy echoed this sentiment, pointing out the risks of further price cuts and ongoing questions about the fundamentals. Levy maintains an Equal Weight rating on Tesla’s stock with a $180 price target.

Future Catalysts

Upcoming Quarterly Results

Tesla is scheduled to report its quarterly results on July 23 after the market close. Investors and analysts will be closely watching these results to gauge the company’s financial health and outlook.

Positive earnings could further boost the stock, while any disappointments could trigger a sell-off.

Anticipation of the Robotaxi Launch

One of the most anticipated events for Tesla is the unveiling of its robotaxi on August 8. This event is expected to showcase Tesla’s advancements in autonomous driving technology and could serve as a major catalyst for the stock.

Wedbush managing director Dan Ives recently raised his price target on Tesla to $300, with a new bull case of $400 for 2025, citing the robotaxi event as a key driver for the stock’s future performance.

Tesla as an AI Leader

Ives also emphasized that Tesla’s stock is the most undervalued AI player in the market. The company’s focus on full self-driving (FSD) technology and its potential to revolutionize transportation through autonomous vehicles are significant growth drivers.

The robotaxi event is expected to highlight Tesla’s AI capabilities and position the company as a leader in the autonomous vehicle market.

Conclusion

Tesla’s recent stock surge can be attributed to a combination of strong quarterly deliveries, growth in its energy storage business, and positive developments in China.

However, the company still faces challenges from competition and potential demand fluctuations.

Investors are eagerly awaiting the upcoming quarterly results and the much-anticipated robotaxi launch, which could provide further insights into Tesla’s future trajectory.

As Tesla continues to innovate and expand its market presence, the stock remains a focal point for investors looking to capitalize on the growing EV and AI sectors.

The company’s ability to navigate near-term challenges while leveraging its technological advancements will be crucial in maintaining its upward momentum.