Tesla stock: Tesla surges 10% as Musk’s promise of ‘cheaper’ cars eases growth concerns
Investors were bracing for the worst after a tumultuous week at Tesla that included mass layoffs, executive departures, price cuts and the postponement of a meeting with India’s prime minister.
The newly established plan helped Wall Street shrug off the company’s lackluster first-quarter performance, which included lower-than-expected profits and its first quarterly decline in revenue in nearly four years.
“Our first impression is that CEO Elon Musk is appeasing the market by accelerating new product launches,” said analysts at Jefferies, led by Philippe Houchois.
Tesla was set to add about $50 billion to its market value of about $460 billion. The stock had fallen 42% this year as of last close as high borrowing costs dampened demand for electric vehicles and a deepening price war in key Chinese markets.
Tesla’s growth strategy could bolster support for a May shareholder vote on Musk’s $56 billion compensation package, which was invalidated by a Delaware court in January. Some Tesla investors, such as Ross Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management, have said they plan to oppose the package, citing the recent decline in Tesla’s stock price and the precarious nature of its board of directors. ‘Content removed MODEL Y/MODEL 3’
Some analysts took Tesla’s statement that the cheaper model would be built using its current platform and production line as a sign of a retreat from more ambitious plans for an all-new model that was expected to cost $25,000.
“We consider the potentially unsatisfactory Model Y/Model 3 version ‘cheaper’ because it has improved software and AI/hardware features but a lower price,” said Adam Jonas, an analyst at Morgan Stanley.
Musk declined to provide details about cheaper models and instead spent much of his earnings on Tesla’s efforts to diversify its business into AI, humanoid robots and autonomous vehicle operations. All of this is based on software and hardware products that are not yet fully finished. has been developed.
Investors and analysts have long placed a premium on Tesla’s efforts such as driver-assistance technology.
Tesla’s stock is trading at 57.38 times expected 12-month earnings, a significantly higher PE ratio than Ford’s 7.06 and General Motors’ 4.80.
Tesla shares have surged to about $160 per share, giving short sellers $1.62 billion in losses on paper since Tuesday’s close, according to data and analytics firm Ortex.
But short sellers still made about $8 billion in profits this year.
At least nine analysts lowered their price targets for Tesla, while two raised them. The current median price is $172.83, according to LSEG.
“Details (about the new model) are thin, but this was a smart move by Musk to justify negative cash flow and high capital expenditures,” said Kathleen Brooks, research director at XTB.
“Unlike many companies that are scaling back capital spending in the current environment, Tesla is doing the opposite… and putting itself in a strong position as the EV market becomes more competitive and more price sensitive,” Brooks added.
