Tesla’s stock price rose 20%. Should Elon Musk be thankful?

Key points to remember

• Tesla’s stock price has risen 20% since announcing the risky decision to cut the price of its Model Y and Model 3 units
• A strong fourth quarter performance gave Tesla its most profitable year on record, with 1.8 million Tesla units in 2023 expected to be in production
• It’s good news for controversial CEO Elon Musk, who faces accusations of fraudulent investors and a prolonged fallout on Twitter

Electric car enthusiasts and die-hard Elon fans everywhere rejoiced when Tesla stock rose 20% last week. The stock soared 47% last month, marking a turning point as the stock fell around 70% in value last year.

While investors were initially unconvinced by this dramatic announcement, the company’s fortunes may begin to change. That’s good news for CEO Elon Musk, who currently finds himself in a quagmire of legal drama and his “Chief Twit” status.

Thus, Tesla shareholders are satisfied. By the way, if you haven’t ridden the Tesla wave yet, our Emerging Technology Kit uses AI to invest in companies like Tesla, Apple and Amazon.

Now the question is, will Tesla’s luck last?

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Why is Tesla stocking up this week?

The rallying numbers come after Tesla dramatically cut prices for its most popular electric vehicle models, the Model Y and Model 3.

While Tesla cited the reason as supply chain savings they could pass on to consumers, the move coincided with revamped tax credits available on electric vehicles in the United States. The new Model Y and Model 3 prices meant that new owners could claim the $7,500 tax credit, creating an increase in request.

That was just the beginning after all: the company’s fourth quarter earnings call revealed Tesla’s best financial year yet. Its net income increased by 59% and Teslas order rates were currently double their usual level medium.

These two factors together mean that Tesla’s risky strategy paid off with a bullish trajectory in its stock price, closing at $178 on Friday last week.

What happened after Tesla’s price cuts?

Inside the Tesla Q4 earnings call Last week, CEO Elon Musk addressed the price cuts. “So far in January, we have had the largest orders since the start of the year than ever in our history. We are currently seeing orders almost twice the production rate. »

Musk also added that if there wasn’t a “damn force majeure thing happening somewhere on Earth”, then Tesla has “the potential to make two million cars this year”. Tesla had previously released figures predicting 1.8 million units. He added that he is confident the demand is just as high.

The immediate fallout from the announcement sent Tesla prices plummeting, down 6.4%. It also ricocheted off the stock prices of other major electric vehicle makers: GM, Ford and Volkswagen all suffered losses of between 3.6% and 6%.

But consumer reaction to Tesla’s announcement was instantaneous. Orders jumped as U.S. buyers were boosted by a potential change to the Cut Inflation Act coming in March that could again push Tesla electric vehicles out of tax credit range.

It’s safe to say that we can expect other major automakers to follow suit since Tesla threw down the gauntlet.

Could Tesla stock surge in 2023?

The fourth quarter earnings call didn’t just talk about big price changes. Tesla’s year-over-year auto revenue rose 33% to $21.3 billion in the fourth quarter, making 2022 its most profitable year checked in. Shares jumped 5% after the bell.

Tesla also hinted that big changes are coming for consumers. We already know about the planned Cybertruck, the production of which is now confirmed by this summer.

Its upcoming Investor Day on March 1 has been a source of speculation about what might be announced – especially since the company hasn’t held one since 2019. Some are predict we could have a new, even cheaper model announced the same day to compete with the economy electric vehicle market in China. A next-generation platform for its vehicles is also reportedly being developed.

There is also growing interest in the energy storage part of Tesla. Powerwall and Megapack batteries are rechargeable batteries that Tesla presents as the future of renewable energy.

Is it right to do so? May be. Tesla’s energy storage deployments have grown 152% annually, reaching 2,462 MWh in the fourth quarter of 2022. Tesla Chief Financial Officer Zach Kirkhorn said of the division on the call“While there is still a long way to go to grow this business and improve costs, we believe we are on a good trajectory.”

There’s plenty to get excited about Tesla’s ambitious growth plans and what’s in the works. But with a CEO like Elon in charge, anything can happen.

Is this all good for Elon Musk?

Let’s just say that the uptrend in Tesla stocks is really, really good time for Elon Musk. The maverick CEO has suffered something of a fall from grace over the past year.

The Twitter fiasco

With Tesla shares down around 65% last year, investors raised eyebrows when Elon announced plans in April 2022 to buy Twitter for a whopping $44 billion.

Elon quickly started to sell Tesla shares to fund the acquisition, totaling more than $22 billion by the end of 2022 across four different deals. The deal was finally reached in October, but not without months of threatened litigation beforehand after Musk apparently got cold feet over the deal.

Since taking over the company, Elon has systematically gutted the company, laying off half of the 7,500 employees and leaving thousands more quitting. Tesla’s top software engineers have been pulled in make Twitter a success, with some investors accusing Elon of being distracted.

The woes of litigation

Musk also testified in San Francisco court about his now infamous ‘funding secured’ tweet from 2018. A Tesla shareholder class action lawsuit accused Musk for impacting stock prices and defrauding investors with his impulsive communications. Any move not in his favor could send Tesla’s stock price plummeting again.

Embattled Musk has already had his fair share of controversy following him into 2023, but he still believes his takeover of Twitter is a good thing for Tesla. “I think Twitter is actually an incredibly powerful tool to drive demand for Tesla,” he said. said on the earnings call.

With over 127 million followers, it’s fair to say he has a captive following. Only time will tell if this has a positive or negative effect on Tesla.

The bottom line

Tesla has had its fair share of turmoil lately, but there’s no denying Elon Musk’s ability as an entrepreneur. Whether the company will return to its heady valuations from 2021 remains to be seen, but it’s certainly not worth counting on just yet.

For investors, it’s hard to know when is the right time to jump into stocks as volatile as Tesla.

That’s why we created the Emerging Technology Kit, to let the AI ​​make those calls for you. Every week, our AI analyzes a huge amount of data to predict upcoming performance and volatility across various verticals in the tech industry.

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The Kit can invest in companies like Tesla, as well as other big tech companies like Apple and Microsoft, tech ETFs, and cryptos like Bitcoin, Ethereum, and Chainlink. Not only does this mean investors can expose themselves to a tech bounce if and when it happens, but they also have the power of AI to make portfolio adjustments, automatically, along the way.

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