Tesla stock seems unstoppable like Denver NuggetsOn Monday, the NBA champions were crowned after dismantling the Miami Heat in five games. There are many reasons for the stock’s rise, but none of them really justify the entire huge move.
This is one of those times when investors create a narrative to explain a move. It reverses the normal pattern of investors seeing and reacting to the news, which moves the stock price.
Tesla stock (ticker: TSLA) closed at $258.71, up $8.88, or 3.6%. the
Standard & Poor’s 500
And
NASDAQ Composite
gain of 0.7% and 0.8%, respectively.
Shares are now up 13 consecutive trading sessions, up 41% over that period. It’s the stock’s longest winning streak to date and the best 13-day stretch since the 13 sessions ended Feb. 3. 9, when it rose 44%, according to market data from Dow Jones.
Tesla stock is up about 27% in June and 110% in 2023. The question is why?
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There are some basic reasons to consider. Tesla’s decision to open its supercharged network to General Motors (GM) and Ford Motor (F) crystallized the value of this part of Tesla’s business to investors.
Tesla is not just a car maker. It controls the EV equivalent of a vast network of gas stations, which means GM and Ford EV drivers will regularly pay their Tesla to recharge on road trips.
Reports that Tesla is preparing to produce more than 350,000 Cybertrucks annually have also helped. Wall Street’s projections for Cybertruck production are no more than 250,000 annually, according to Bloomberg.
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There are more. All versions of the Tesla Model 3 are now eligible for the $7,500 purchase tax credit passed as part of the Inflation Reduction Act. The rear wheel drive version lost half the credit in April due to factors related to where the batteries were produced or the materials used to make them.
Tesla CEO Elon Musk recently named a new CEO at Twitter, giving him more time to spend with Tesla. Ending any backlog on Twitter has helped lately.
The entire market rose on Tuesday after slower-than-expected May inflation, reported on Tuesday, boosted investor confidence that the Fed will stop raising interest rates soon.
All of this is good news, but is Toyota Motor (TM) worth it? The increase in Tesla’s market capitalization over the past 13 days has come close to the Japanese automaker’s entire market capitalization of about $255 billion.
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Contrast Tesla’s nearly 30% jump with Nvidia’s stock jump after the chipmaker reported its fiscal first-quarter results. Management’s guidance for the second quarter was about 50% better than Wall Street had expected, and the stock rose 25% in response because investors responded to clearly important news.
Earnings per share estimates for Nvidia’s 2024 fiscal year, which ends in January, came to about $7.40 per share from $4.50 per share since the first-quarter report, for a gain of about 64%. Nvidia stock is up about 34% since then.
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Investors can argue about whether artificial intelligence will be a sustainable generator of demand for Nvidia chips, or whether Nvidia stock should rise more or less. But why stocks took off is not part of the debate. Incredible financial guidance did that.
With Tesla, reason is always up for debate. Factors moving the stock on any given day could include hard-to-context data from China on weekly auto insurance sales or tweets from Elon Musk.
What is indisputable is that Tesla is the most valuable car company on the planet. Its stock is often the most traded stock in the entire US market.
There is rarely a dull day to invest in Tesla.
Write to Al Root at [email protected]
