Al Root and Brian Swint
Tesla CEO Elon Musk made a surprise visit to China over the weekend and was rewarded for his effort.
Tesla received official approval from Beijing to introduce its most advanced driver-assistance features in the company's cars, according to The Wall Street Journal.
It's a "major moment" for Tesla, wrote Wedbush analyst Dan Ives in a Monday report. "
Tesla stock was up 10.4% at $185.74 in premarket trading Monday while S&P 500 and Nasdaq Composite futures were up 0.2% and 0.3%, respectively.
At premarket levels, Tesla stock has gained about 31% over the past five days. That's the stock's best run since late January 2023, when it gained 33% over the five-day span that ended Jan. 27. Before that, investors have to look back to September 2020 to find a better five-day run for the stock.
Tesla offers some driver-assistance features, such as adaptive cruise control, but wasn't allowed to offer all the features of its highest-level system it calls Full Self-Driving, or FSD.
The win does a few things for Tesla. For starters, better driver-assistance products can mean more demand for Teslas in China. Second, it demonstrates the company can navigate complicated government regulations related to driver-assistance technology. And third, it shows that Tesla has increasing confidence in the quality of its self-driving car technology.
"While the long-term valuation story at Tesla hinges on FSD and autonomous, a key missing piece in that puzzle is Tesla making FSD available in China which is now a done deal," added Ives. "This is a key moment for Musk as well as Beijing at a time that Tesla has faced massive domestic EV competition in China along with softer demand."
Musk has long believed that achieving autonomous driving represents a huge financial windfall for the company. It has been harder to achieve than anyone expected -- the original DARPA self-driving challenge was 20 years ago -- but Tesla has scheduled a robotaxi reveal event on August 8.
To help win Chinese approval for FSD, Musk needed to assuage regulators' concerns about data security risks. To that end, he agreed to use navigation and mapping functions provided by Chinese firm Baidu, the Journal said.
Baidu's American Depositary Receipts, or ADRs, were up 5.8% in premarket trading at $106.39 apiece.
Tesla shares' early gain on Monday extends the recent winning streak. The stock was up 14.4% this past week.
Better-than-feared first-quarter earnings as well as a revelation that Tesla would accelerate the development of a lower-priced vehicle boosted investor sentiment.
Investors needed it -- coming into Monday, Tesla shares were off about 32% so far this year, underperforming the Nasdaq by some 38 percentage points. Slowing growth has weighed on investors' minds. Tesla delivered about 387,000 units in the first quarter, down almost 9%, year over year.
Ives rates Tesla shares Buy and has a $275 price target for the stock. Overall, 43% of analysts covering Tesla stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Tesla shares is about $183 each.
Tesla stock caught a downgrade on Monday, but that isn't affecting shares. Philips Securities analyst Jonathan Woo downgraded shares on Monday to Sell from Hold. He cut his price target to $145 a share, down from $175, citing slowing growth and pressure on profit margins.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 29, 2024 08:44 ET (12:44 GMT)
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