Tesla stock looks as unstoppable as the Denver Nuggets, crowned NBA Champions Monday after dismantling the Miami Heat in five games. There are many reasons the stock is up, but none of them really justify the entirety of the hefty move.
This is one of those times when investors create a narrative to explain a move. It reverses the ordinary pattern of investors seeing news and reacting to it, moving a stock’s price.
Tesla (ticker: TSLA) stock closed at $258.71, up $8.88, or 3.6%. The S&P 500 and Nasdaq Composite gained 0.7% and 0.8%, respectively.
Shares are now up 13 consecutive trading sessions, rising 41% over that period. It is the stock’s longest winning streak yet and the best 13-day stretch since the 13 sessions ended Feb. 9, when it rose 44%, according to Dow Jones Market Data.
Tesla stock is up about 27% in June and 110% in 2023. The question is why?
There are some fundamental reasons to consider. Tesla’s decision to open up its supercharging charging network to General Motors (GM) and Ford Motor (F) has crystallized the value of that part of Tesla’s business for investors.
Tesla isn’t only a car maker. It controls the EV equivalent of a vast network of gas stations, which means GM and Ford EV drivers will pay Tesla regularly to recharge on road trips.
Reports that Tesla is gearing up to produce more than 350,000 Cybertrucks a year have helped too. Wall Street projections for Cybertruck output don’t get much above 250,000 a year, according to Bloomberg.
There is more. All versions of the Tesla Model 3 now qualify for the $7,500 purchase tax credit passed as part of the Inflation Reduction Act. The rear-wheel drive version had lost half the credit in April because of factors related to where the batteries, or the materials used to make them, were produced.
Tesla CEO Elon Musk recently named a new Twitter CEO, leaving him more time to spend running Tesla. The end of any Twitter overhang has helped lately.
And the entire market is up Tuesday after slower than expected May inflation, reported Tuesday, boosted investor confidence that the Fed will stop hiking interest rates soon.
It’s all good news, but is it worth as much as Toyota Motor (TM)? The increase in Tesla’s market capitalization over the past 13 days is getting very close to the Japanese car company’s entire market cap of roughly $255 billion.
Contrast Tesla’s near-30% rally with Nvidia’s stock jump after the chip maker announced its results for its fiscal first quarter. Management’s guidance for the second quarter was roughly 50% better than Wall Street was expecting, and the stock rose 25% in response as investors responded to clearly significant news.
Earnings per share estimates for Nvidia’s fiscal year 2024, which ends in January, have gone to about $7.40 a share from $4.50 a share since the first-quarter report, for a gain of about 64%. Nvidia stock has risen about 34% since then.
Investors can argue about whether artificial intelligence will be a sustainable creator of demand for Nvidia chips, or whether Nvidia stock should be up more or less. But the reason the shares took off isn’t part of the debate. Incredible financial guidance did it.
With Tesla, the reason is always up for debate. Factors moving the stock on any given day can also include difficult-to-contextualize data from China about weekly car insurance sales or tweets from Elon Musk.
What is indisputable is that Tesla is the most valuable car company on the planet. Its stock is often the most heavily traded security in the entire U.S. market.
There is rarely a dull day investing in Tesla.