Tesla, the pioneering electric vehicle company led by controversial CEO Elon Musk, has seen its stock price surge in recent trading sessions, raising hopes for a turnaround after a challenging start to 2023.
On Thursday, Tesla shares soared 6.2%, closing above $200 for the first time since late January. The gains continued on Friday, with the stock up another 1.5% in premarket trading to $203.44. These back-to-back rallies have injected fresh optimism into Tesla’s investor base after a tumultuous period marked by slowing growth projections and ongoing production challenges.
The recent upswing, however, appears disconnected from any significant news or analyst actions. No Wall Street upgrades, downgrades, or price target changes have surfaced to explain the stock’s sudden buoyancy. Instead, the rally seems to stem from a filing misunderstanding and speculation around CEO Elon Musk’s ownership stake.
On Thursday, Tesla filed a routine Securities and Exchange Commission (SEC) form detailing Musk’s stock ownership. The filing revealed that Musk controls approximately 20% of Tesla’s outstanding shares, comprising 13% direct ownership and an additional 7% in unexercised stock options. Crucially, these figures were unchanged from a year ago, yet some investors seemingly misinterpreted the filing as signaling an increase in Musk’s control.
Musk’s Tesla ownership has been a focal point in recent months. In December 2022, the mercurial CEO tweeted about wanting to increase his stake to 25% control. More recently, a Delaware judge invalidated a 2018 pay package that was the source of Musk’s sizable options holdings, further fueling uncertainty around his stake.
Despite the confusion, analysts remain cautious about Tesla’s near-term prospects. The company delivered approximately 1.8 million vehicles in 2023, a robust 40% increase over the previous year. However, Tesla has tempered expectations for 2024, projecting growth below 20% as global economic headwinds and competition from established automakers intensify.
Wall Street currently anticipates Tesla will earn around $3.08 per share in 2024, a 20% decline from the $3.85 expected at the end of December. These revised earnings estimates have closely tracked Tesla’s stock performance so far this year, which has trailed the broader market’s rally.
While Tesla shares have climbed on 15 occasions in 2023, the stock has fallen on 18 trading days, leaving it down 19.3% year-to-date. In comparison, the benchmark S&P 500 index has risen on 19 days and fallen on 13, resulting in a 5.5% gain for the year. This 25-percentage-point performance gap highlights investors’ growing concerns about Tesla’s ability to sustain its breakneck growth trajectory.
Still, Tesla’s recent stock surge suggests a subset of investors remain bullish on the company’s long-term prospects. Shares of Tesla’s electric vehicle rivals, including Lucid Group, NIO, and BYD, have also risen in sympathy with the company’s rebound, indicating broader optimism in the sector.
As Tesla navigates an increasingly competitive landscape and grapples with production challenges, the company’s stock performance will remain a closely watched barometer of investor sentiment. While the recent rally has provided a temporary reprieve, Tesla’s ability to reignite its growth and maintain its leadership position in the electric vehicle market will ultimately determine the company’s long-term viability and stock valuation.
