Tesla is back in the spotlight with a significant surge in its stock, adding over $140 billion in market value after an impressive 21% jump in share price on Thursday. Investors were reassured by the company’s strong sales forecast, along with CEO Elon Musk’s plans to expand Tesla’s core electric vehicle (EV) business. This stock rally marks Tesla’s biggest gain since 2013, following concerns earlier this month that Musk was losing focus on the company’s EV ambitions.
Musk projected Tesla’s sales to grow by 20%-30% in 2024, calming investor concerns about future demand for EVs. One of the most exciting promises was the introduction of an affordable Tesla vehicle by early 2025. This upcoming model is expected to lower the barrier to entry for EV buyers, expanding Tesla’s customer base while helping the company maintain its leadership in the EV market.
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Additionally, Tesla’s focus on reducing production costs seems to be paying off. The company reported that its cost of goods sold (COGS) per vehicle has dropped to a record low of $35,100, significantly boosting margins in the third quarter. This cost efficiency is critical in the competitive EV landscape as traditional automakers ramp up their own electric offerings.
Another factor contributing to Tesla’s financial performance is its Full Self-Driving (FSD) software, which generated $326 million in revenue during the third quarter. While FSD has been a key focus for Tesla, especially in the context of its autonomous vehicle ambitions, investors are still cautiously optimistic. Musk doubled down on his vision of Tesla vehicles offering paid, driverless ride-hailing services by 2025, signaling that the company’s long-term plan includes a shift toward mobility services.
However, regulatory hurdles remain a significant challenge for the widespread adoption of robotaxis. While Musk’s enthusiasm for autonomous driving has not wavered, some investors remain skeptical of how quickly Tesla can scale this technology in a regulated market.
Despite Tesla’s impressive gains, some investors are not entirely convinced. Critics, such as Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, expressed concerns over Musk’s focus on ventures outside of Tesla’s core business. Many believe Musk should return to prioritizing vehicle production and sales, especially with new models like the Cybertruck on the horizon. Gerber also pointed out that Tesla’s stock continues to trade at an extremely high price-to-earnings (P/E) ratio of 72.75, compared to more established automakers like Ford, which trades at just 5.94 times forward earnings.
Despite some investor hesitation, several analysts have adjusted their price targets for Tesla stock, reflecting renewed optimism in the company’s growth trajectory. With a median price target of $221, Tesla continues to draw attention from both institutional and retail investors who are betting on its potential to dominate the EV and autonomous driving markets.
For now, Tesla seems to have calmed investor nerves, proving that its core EV business is still strong despite Musk’s ambitious forays into artificial intelligence and robotics. However, with regulatory hurdles and high expectations surrounding FSD and robotaxis, the road ahead remains uncertain. Nonetheless, with solid sales forecasts and cost reductions, Tesla appears well-positioned to continue its reign as the leader in the electric vehicle revolution.
