Tesla stock is on an epic run, rising for a ninth consecutive session on Monday. It will take a little help from artificial intelligence to keep the streak alive.
Tesla stock has lagged far behind the other members of the Magnificent Seven so far this year.
Shares opened lower, trading below $245, before rallying as high as $259.44. The stock closed up 0.6% at $252.94 while the S&P 500 rose 0.1% and theDow Jones Industrial Average fell 0.1%.
A nine-day winning streak is impressive but Tesla shares are given to extremes. Look no further than Wall Street to understand why. The difference between the highest and lowest analyst price targets is roughly $200, or about 80% of the recent stock price. The ratio for Apple stock is about 40%.
Moves in the price show a similar pattern. Over the past five years, Tesla stock has spent almost half the time trading above Wall Street’s average price target. The number for Apple is closer to 20%.
Tesla’s Jekyll and Hyde nature has separated it from other large tech stocks for much of 2024. For most of the year, shares of the EV maker were left in the dust by the other Magnificent Seven stocks: Microsoft, Nvidia, Apple, Amazon.com, Alphabet, and Meta Platforms. Coming into Monday, those six stocks had risen by an average of about 53% this year.
Until Friday, Tesla was the only one of the seven with a loss in 2024. But after gaining 39% over the past nine trading sessions, shares are now up almost 2% this year.
It has been a good time for all the Magnificent Seven stocks. Coming into Monday’s trading, the other six gained an average of 7% during Tesla’s recent run. The S&P 500 gained about 2%.
While the business opportunity from artificial intelligence is helping all of the Magnificent Seven except Tesla, the picture for the EV maker is less clear. According to Gary Black, co-founder of the Future Fund Active ETF co-founder and a Tesla shareholder, the car business is behind the gain. “Delivery relief,” said Black.
On July 2, Tesla reported better-than-expected second-quarter vehicle deliveries. The company sold about 444,000 units, down 4.8% from a year earlier. A decline isn’t great, but the lowest Wall Street estimates had sales down more than 15%. The better result gave investors confidence that Tesla can grow again in 2025. It is expected to deliver about 1.8 million units in 2024, flat with 2023.
Better deliveries have also stabilized forecasts for earnings. While Wall Street expected Tesla to earn about $3.80 a share at the start of the year, the estimate is now about $2.40.
Investors don’t like to buy stocks with falling estimates, said BFR Research founder Brian Rauscher. Estimates haven’t started to move higher, but they are getting “less bad,” he said. Less bad is often good enough for investors.
Earnings estimates and vehicle deliveries both relate to Tesla’s car business. “AI has been a non-factor so far,” said Black. The “core EV business has stabilized.”
That offers some additional hope to Tesla shareholders. Wedbush analyst Dan Ives said Tesla’s AI business could be worth an additional $1 trillion, more than double Tesla’s current market value of about $800 billion.
Tesla uses AI both to improve its driver-assistance features and to train labor-saving robots it plans to sell soon.
“Tesla is the most undervalued AI play in the market in our view,” wrote Ives in a recent report. He is looking forward to Tesla’s Aug. 8 robotaxi event, where the EV maker will detail gains made in teaching its cars to drive themselves. An impressive event could drive the stock even higher, he believes.
Investors looking at Tesla’s recent run might assume that hype around artificial intelligence is helping. That might not be the case, which means that the stock could go even higher if Tesla investors catch the AI bug.