Tesla Stock [TSLA] Closes At New 52 Week High — What Caused This & Does It Matter?

For those who own Tesla stock*, the drama of the share price seems to be extra drama beyond the drama associated with the company’s growth. Many would say the share price volatility is unwelcome drama. Others let it go, like water down a goose’s back.

The superficial reason bandied about today for TSLA’s strong rise is that noted bear Dan Levy of Credit Suisse acknowledged Tesla’s lead in electrification and software. Analysts make prognostications all the time. Most are not newsworthy. It’s hard to think such an acknowledgement would cause Tesla shares to rise $23, or close to 6.5% higher on the day. Many times, the market goes up for unknown reasons, and people scurry about to find one news item as the source. Given the complexity of the market, that’s a fool’s errand.

Let me list some reasons why Tesla may have gone up today:

• Price momentum in Tesla stock has been building for months. Tesla stock has more than doubled since the low prices it was at in June. Many times, upward price momentum leads to more price momentum as speculators pile in. Vicious moves down lead to equally vicious moves up afterwards in a “bear trap.”
• The general market is trending higher. As a sign, that’s a good environment for individual stocks to move higher.
• Tesla Gigafactory 3 (GF3) is complete and now producing cars for the Chinese market. There must be some investors still in shock that Tesla pulled off the impossible and built a working factory in a year, and others who are just starting to process it and work this into their models or expectations.
• The Porsche Taycan came in with an EPA range of 201 miles. This Porsche was presumed to be major competition to the Tesla Model S. With the much lower range and higher price, many are re-evaluating that narrative. There are no potential “Tesla Killers” coming until 2021, and likely none at all. Markets like it when companies don’t have competition.
• Tesla Model 3 demand is steady and rising. There was the fear that once the initial backlog was finished sales would tank. Nope.
• The market is realizing Model Y has more potential than Model 3. We are getting closer to the Y launching. It will be a big hit.
• The Tesla Cybertruck, for all its zaniness, pulled down a quarter of a million known reservations/pre-orders. That’s a big deal, again shocking the market on what the company is worth.
• Tesla said GF3 would be finished in less than a year, and it was. When companies do what they say they will, trust between investors and the company grows. Tesla met its ambitious — and many claimed impossible — goal.
• Solar Roof V3 and Tesla Energy are poised for major growth. It’s simple math to show a smaller base will grow faster than a larger base for the same amount of growth. Now that the company is on steadier footing, Tesla can devote more resources to growing the smaller Energy division.
• The Q3 earnings call and positive cash flow show Tesla bears are rapidly running out of excuses.
• Investors are buying before release of Q4 delivery numbers in two weeks. There is definitely a “buy the rumor, sell the news” cycle to Tesla delivery numbers. Informal sampling shows Q4 will have very good production and delivery numbers, heightening this trend.
• The profits and cashflow in Q4 ensure Tesla is added to the S&P500. This should serve to broaden the investor base and decrease volatility.
• The market believed the EV credit would be expanded for Tesla and some others. After-hours results show it wasn’t and Tesla stock has given up some gains.

Now that we have covered some of the reasons TSLA hit a new high, does it matter? Yes, it matters, and no, it doesn’t. It matters that Tesla and cleantech are doing well and getting more attention. That encourages others to pursue cleantech. It helps the employees who own Tesla stock and options, and employee morale helps the company.

No, it doesn’t, in that changes in stock price no longer have the ability to control if Tesla survives or fails. That ship has sailed. Tesla is a bonafide competitor, poised to stick around. And people have gotten quite used to Tesla stock price volatility.

Congrats to those who own Tesla shares! Here is to many more 52-week highs. There are quite a few tailwinds helping Tesla. The market is discovering those tailwinds and re-evaluating Tesla higher. That’s good for all of us, as it helps Tesla succeed in its mission, which is to accelerate the world’s transition to sustainable energy.

*Disclosure: I am long Tesla stock and long on Tesla cars.

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