Many have described Tesla's latest financial report and conference call as "Amazing words, horrible numbers."
On Wednesday, Tesla's stock price surged by over 14%, marking its largest increase since 2021. On Thursday, Tesla's stock price continued to rise by nearly 5%.
Correspondingly, the price of Direxion Daily TSLA Bull 2X Shares (TSLL), totaling $750 million, increased by over 33% over two days.
Even the Consumer Discretionary Select Sector SPDR Fund (XLY), valued at $19 billion, saw a rise of over 1%, outperforming the S&P 500 index. This ETF holds over 11% of its portfolio in Tesla stocks.
Significant Growth Slowdown
Tesla's financial report confirms investors' concerns about its first-quarter financial situation.
Adjusted earnings per share were $0.45, a decrease of 47% compared to the same period last year. Revenue was $21.3 billion, down by 8.7%. The company burned through $2.5 billion in cash this quarter.
According to the company, these financial metrics are unlikely to improve immediately.
During its first-quarter shareholder meeting, the company stated, "In 2024, the growth rate of our vehicle sales may significantly lag behind that of 2023."
However, investors are not concerned. Tesla's slowing growth this year is already well-known; this is also why its stock price plummeted by 42% from the beginning of the year to Tuesday.
Future Vision
Instead, investors are focusing on Tesla's cost-cutting measures, including laying off 2,700 people at its Gigafactory in Austin, Texas, and CEO Elon Musk's highly optimistic future vision described during its conference call.
Musk pledged that the company would soon operate millions of autonomous vehicles, which he called "Cybercabs." It also plans to start selling its humanoid robot, Optimus, as early as 2025.
Musk has a history of making bold promises, which often take longer to fulfill than initially predicted. However, he also has a reputation for delivering on many promises.
Wednesday's excitement for Tesla investors wasn't just about robots and self-driving cars. The company stated that it would "accelerate the launch of new models, earlier than the previously communicated plan to start production in the second half of 2025."
The company stated, "These new models, including more affordable models, will leverage aspects of the next-generation platform as well as our current platform and will be able to be produced on the same production line as our current models."
This alleviated some investors' concerns about Tesla's lineup becoming outdated, while also opening up the possibility of accelerating growth next year.
Earlier this month, Reuters reported that Tesla had abandoned plans to build a cheap mass-market car called the Model 2.
Although Tesla did not specify if any of its new models would be equivalent to the Model 2, the fact that the company is introducing new models to the market is enough to pique investors' interest.
Competition Is Increasing
However, not everyone believes in Tesla's rosy rhetoric.
Analysts at Bernstein stated that they "struggle to understand why Tesla needs a separate robo-taxi product." They added that they believe widespread deployment of Tesla's Cybercab "is still 5 to 10 years away" and that autonomous driving cars "may not necessarily be a winner-takes-all market."
Analysts at Bank of America hold the opposite view.
Tesla addressed "the main concerns of this quarter and revitalized the growth narrative," they said. "In the short term, the tide of news flow seems to indicate that the risk of the stock is tilting more positively."
Tesla's stock remains a battleground for competing narratives, at least for today, with the bulls winning.
Focus ETFs
Direxion Daily TSLA Bull 2X Shares (TSLL)
The assets under management of Direxion Daily TSLA Bull 2X Shares total $600 million. TSLL provides twice the leverage exposure to Tesla's stock price movements on a daily basis (net of fees and expenses). It charges an annual fee of 0.96%.
TSLL is a short-term tactical tool designed to provide double the price return of Tesla's stock on a daily basis while reducing costs and expenses. Purchasers holding stocks for more than one day will need to monitor and rebalance their positions frequently to attempt to achieve the 2x multiple.
Consumer Discretionary Select Sector SPDR Fund (XLY)
XLY tracks the market value-weighted index of non-essential consumer goods stocks in the S&P 500 index. Tesla holds 53 securities in the basket, ranking second in assets at 15.7%. The Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in the field, with assets under management totaling $19 billion. It charges an annual fee of 0.09%.
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