- Tesla’s stock price has rallied 20% since it announced the risky decision to cut the price of its Model Y and Model 3 units
- A strong Q4 performance gave Tesla its most profitable year on record, with 1.8m Tesla units in 2023 predicted to be in production
- It’s good news for controversial CEO Elon Musk, who faces defrauding investor charges and a prolonged Twitter fallout
Electric car enthusiasts and diehard Elon fans everywhere rejoiced as Tesla stock hit a 20% increase last week. The stock has climbed 47% in the last month, marking a turning point since the stock fell around 70% in value last year.
While investors were initially unconvinced at the dramatic announcement, the company’s fortunes could be starting to change. This is good news for CEO Elon Musk, who’s currently in a quagmire of legal drama and his status as ‘Chief Twit’.
So, Tesla shareholders are happy. By the way, if you’ve not ridden the Tesla wave yet, our Emerging Tech Kit uses AI to invest in companies like Tesla, Apple and Amazon.
Now the question is: will Tesla’s run of good luck last?
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Why is Tesla stock up this week?
The rallying numbers come after Tesla dramatically cut the prices of its most popular EV models, the Model Y and Model 3.
While Tesla cited the reason as supply chain savings they could pass on to consumers, the move coincided with the revamped tax credits available on EVs in the US. The new price points for the Model Y and Model 3 meant new owners could claim the $7,500 tax credit, creating a surge in demand.
That ended up just being the start: the company’s Q4 earnings call revealed Tesla’s best financial year yet. Its net income has increased by 59% and that order rates for Teslas was currently double their usual average.
These two factors together mean Tesla’s risky strategy has paid off with an upward trajectory on its share price, closing at $178 on Friday last week.
What happened after the Tesla price cuts?
In the Tesla Q4 earnings call last week, CEO Elon Musk addressed the price cuts. “Thus far in January, we’ve seen the strongest orders year-to-date than ever in our history. We’re currently seeing orders of almost twice the rate of production.”
Musk also added that if there wasn’t some “friggin’ force majeure thing that happens somewhere on Earth”, then Tesla has “the potential to do two million cars this year”. Tesla had already put out figures predicting 1.8m units. He added that he’s confident demand is that high.
The immediate fallout of the announcement tanked Tesla prices, falling 6.4%. It also ricocheted into other leading EV manufacturers’ share prices: GM, Ford and Volkswagen all sustained losses between 3.6% and 6%.
But the consumer reaction to the Tesla announcement was instant. Orders have surged, with US buyers spurred on by a potential change to the Inflation Reduction Act coming in March that could push Tesla EVs out of the tax credit range again.
It’s safe to say we can expect other leading car manufacturers to follow suit since Tesla threw down the gauntlet.
Could Tesla stock surge in 2023?
The Q4 earnings call didn’t just talk about the big price changes. Tesla’s year-on-year automobile revenue was up 33% to $21.3bn in the fourth quarter, making 2022 its most profitable year on record. Shares jumped 5% after the bell.
Tesla has also been dropping hints that big changes are coming for consumers. We already know about the planned Cybertruck, which is now confirmed to be in production by this summer.
Its upcoming investor day on March 1 has been a source of speculation for what might be announced – especially since the company hasn’t hosted one since 2019. Some are predicting we could have a new, even cheaper model announced on the day to rival the budget EV market in China. A next-gen platform for its vehicles is allegedly under development, too.
There’s also growing interest in Tesla’s energy storage part of the business. The Powerwall and Megapack batteries are rechargeable batteries that Tesla touts as the future of renewable energy.
Is it right to do so? Maybe. Tesla’s energy storage deployments increased 152% yearly, hitting 2,462MWh in Q4 2022. Tesla CFO Zach Kirkhorn said of the division on the call: “While much work remains to grow this business and improve costs, we believe we are on a good trajectory.”
There’s a lot to get excited about when it comes to Tesla’s ambitious growth plans and what’s in the pipeline. But with a CEO like Elon in charge, anything could happen.
Is all this good for Elon Musk?
Let’s just say Tesla shares trending upwards is really, really good timing for Elon Musk. The maverick CEO has suffered somewhat of a fall from grace in the last year.
With Tesla shares down roughly 65% last year, investors raised eyebrows when Elon announced his intention in April 2022 to buy Twitter for a massive $44bn.
Elon promptly started selling off Tesla shares to finance the acquisition, totalling over $22bn by the end of 2022 across four different transactions. The deal eventually went through in October, but not without months of threatened litigation beforehand after Musk seemingly got cold feet on the deal.
Since taking over the company Elon has systematically gutted the company, laying off half of the 7,500-strong workforce and thousands more resigning. Top Tesla software engineers have been pulled into making Twitter a success, with some investors accusing Elon of being distracted.
Musk has also been testifying in a San Francisco court over his now-infamous “funding secured” tweet from 2018. A class-action lawsuit from Tesla shareholders accuses Musk of impacting share prices and defrauding investors with his impulsive comms. Any ruling that isn’t in his favor could tank Tesla share prices again.
The embattled Musk has already had his fair share of controversy that has followed him into 2023, but he still believes his takeover of Twitter is a good thing for Tesla. “I think Twitter is actually an incredibly powerful tool for driving demand for Tesla,” he said on the earnings call.
With over 127m followers, it’s fair to say he has a captive audience. Only time will tell whether it has a positive or negative effect on Tesla.
The bottom line
Tesla has had its fair share of turbulence lately, but there’s no denying Elon Musk’s ability as an entrepreneur. It remains to be seen whether the company will get back to it’s heady valuations from 2021, but it’s definitely not worth counting out just yet.
For investors, it’s difficult to know when is the right time to get into stocks as volatile as Tesla.
That’s why we created the Emerging Tech Kit, to let AI make those calls for you. Every week our AI analyzes a huge amount of data to predict the upcoming performance and volatility across various verticals in the tech sector.
It then uses these predictions to automatically rebalance the Kit across tech ETFs, large cap tech stocks, growth tech stocks and cryptocurrencies via public trusts.
The Kit can invest in companies like Tesla, as well as other big tech companies like Apple and Microsoft, tech sector ETFs and crypto like Bitcoin, Ethereum and Chainlink. Not only does this mean that investors can gain exposure to a tech bounce if and when it happens, but they’ve got the power of AI making portfolio adjustments, automatically, along the way.
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