Tesla’s stock should not be rallying, but the appeal of Musk’s promises is too convincing for Wall Street investors.
Tesla’s stock fully recouped the year-to-date loss it had accumulated, continuing its almost 45% rally this month and 21% in the last week. The stock is now up 8.71% year-to-date after a rough first half of the year.
The rally followed Tesla’s better-than-expected delivery report for the second quarter of 2024. At roughly 444,000 vehicles delivered, the Austin, Texas-based carmaker saw a steep increase from Q1, when it sold only 386,000 cars.
Deliveries in the second quarter were still 4.76% less than the same period in 2023. However, the quarter-to-quarter rise gave Tesla investors the confidence they needed for the future.
In one month’s time, on August 8th, Tesla’s CEO Elon Musk will unveil a new robotaxi segment for the company. Musk will likely announce a new robotaxi model, as in a completely self-driving cab.
Robotaxis is a relatively niche market, with only a few Silicon Valley start-ups working on it. The biggest company at the moment, Alphabet-owned Waymo, operates self-driving taxis in Phoenix, San Francisco, and soon in Los Angeles and Austin.
“The key for Tesla’s stock is the Street recognizing that Tesla is the most undervalued AI play in the market,” Wedbush managing director Dan Ives said, adding that August 8th will pave the road for a full self-driving future.
From cars to…?
Tesla’s rally comes as the company loses market share to an increasing pool of competitors. In particular, EV companies from China threaten to cut Tesla off its most important market, as well as compete in efficiency and price.
Moreover, Tesla’s fleet is quickly becoming obsolete as other companies, from Ford to Mercedes, catch up technologically. 92% of Tesla deliveries come from the Model Y and Model 3, respectively the best and second-best-selling electric cars in 2023. However, they are over 5 years old, with Tesla not releasing any meaningful model since 2019.
“There is still the risk of further price cuts ahead, and there [are] still further questions on fundamentals, we are still facing somewhat of an EV winter on demand,” Barclays senior equity research analyst Dan Levy told Yahoo Finance.
The question if Tesla will shift to robotics and AI, slowly abandoning its car production business model, remains open. Its other divisions, including electric charging, keep besting expectations.
Tesla is part of the “Magnificent 7” stocks and is by far the car company with the highest market capitalization at $792 billion. These are requirements usually related to a tech company, not a carmaker. So why should Tesla strive toward car production?
