Tesla Shares Are On The Rise — Why? Analysts Debate

Shares of Tesla have taken an upward swing this week, with gains supported by upbeat trends for the S&P 500 and the tech-heavy Nasdaq Composite. Yet Tesla shares are making gains in a domino effect from bullish analyst notes as well. Baird analyst Ben Kallo put Tesla on his “best ideas” list this week, citing a range of catalysts for the stock that could help shares hit his 12-month price target of $300. Kallo isn’t alone — but are we willing to take the chance and (continue to) invest?

Wasn’t it only a mere few weeks ago when Tesla shares shrunk after Q2 investor concerns over falling gross margins? The company’s above-forecast earnings and revenue didn’t seem enough, and media stories about sales coming out of Cathie Wood’s ARK Invest ETFs also had negative influence.

But this week Tesla shares crept back up, now holding above its 200-day moving average. What’s changed? Can these influences continue? Can positive trends be sustained?

Cybertruck: The Motley Fool recently outlined how 3 of Tesla’s major growth drivers could propel shares substantially higher over the next 12 months — up to 30% higher — drawing on recent comments from Baird analyst Ben Kallo. Baird said price cuts and their impact on margins will drive the narrative for the electric vehicle maker in the second half of the year. This picture emerges partially in response to Tesla’s periodic price cuts in the US, China, and other markets since late last year, as well as increased discounts and other incentives to reduce inventory, to protect against competition, and due to economic uncertainty.

Of keen interest was how the Giga Texas outbound lot this month has been teeming with Cybertruck activity. Musk has claimed several times that the all-electric pickup would see deliveries this year. This would be an important hurdle overcome, as the 3 best-selling vehicles in the US in 2022 were pickup trucks. Long awaited, the Cybertruck could become the “most important catalyst for Tesla stock.” Reports are that the Tesla Cybertruck has completed some crash tests and is on track to obtain its crashworthiness rating. Speculation is high that it will become the safest pickup truck on the market, regardless of size.

“It’s difficult to overstate the impact the all-electric truck could have on Tesla’s business,” the Fool states, noting huge demand for the vehicle. The Cybertruck will substantially expand Tesla’s existing market, which came in at just under 500,000 vehicles globally in its most recent quarter.

NACS: The North American Charging Standard has gained great acceptance across legacy carmakers. Ah, to be a non-Tesla EV driver and to be able to plug in at a Supercharger would be a dream come true! Tesla has installed Superchargers, usually with 8 or more stalls (charging plugs), every 70 to 120 miles on practically every Interstate highway in the US. “We have understood since day one that a great charging experience is the linchpin to electric vehicle adoption. Getting here meant we spent 10 years building charging infrastructure when basically no one else in the industry would do it,” said Rebecca Tinucci, leader of Tesla’s charging infrastructure team.

Tesla energy: Tesla’s energy business consists of energy storage products and solar solutions, and it continues to grow even though it only comprises about 7% of revenue. Tesla’s energy generation and storage revenue rose 74% year over year in Q2 to more than $1.5 billion. Further, energy storage deployments, measured by gigawatt-hours, increased 222% year over year during the quarter. These numbers suggest that Tesla shares may garner more attention over the next several quarters.

The China effect: IBD recently chronicled how China’s influence has a direct effect on Tesla valuation. In August thus far there have been 39,400 Tesla insurance registrations in China — that’s up 125% vs. the same period in 2022 and keeps the EV company on pace to be around its China Q2 levels. In the second quarter, Tesla sold 247,217 China-made vehicles, representing about 53% of Tesla’s record-setting 466,140 global deliveries. Earlier this month, data from the China Passenger Car Association indicated the electric vehicle maker sold 64,285 China-made electric vehicles during the month of July, down 31% from June and the lowest for 2023.

Tesla’s updated Model 3, code-named Highland, has had a lot of interest in China recently, with expected mass production and deliveries of the new Model 3 to start at the end of September. The Highland is expected to feature some distinct design upgrades and simplified components — ventilated seating, interior lighting upgrades, smart shift, another camera in the front, and Tesla’s Hardware 4.0 Autopilot supercomputer.

Goodbye, Zachary, you’ve served us well: Then again, Tesla announced on August 7 that long-term Chief Financial Officer Zachary Kirkhorn stepped down, with Vaibhav Taneja replacing him. As “Master of Coin,” Kirkhorn’s public demeanor was measured and muted, serving as a stabilizing foil to Musk, especially on earnings calls.

Driver-assistance software: Should Tesla’s Full Self-Driving (FSD) driver-assistance software make the breakthroughs that Musk insists are imminent, the software will enable autonomous driving. It will be an entirely different technology than is currently available to Tesla owners, which, honestly, ranks slightly higher than other driver assist technology on current vehicles. Yet, hope springs eternal with the Tesla crowd, and the $15,000 price tag continues to draw appeal. The capacity to read and respond to stop lights, stop signs, and traffic circles will need to be more refined, yet those results could move FSD toward more adoption.

Final Thoughts

Although Tesla has been on the forefront of transportation electrification, it is now one piece in a much larger puzzle. As Deepak Gorb wrote in Forbes, “The shift to smart e-mobility is not a solitary endeavor; it’s a holistic ecosystem play, uniting diverse stakeholders within a cohesive framework. At its core lies orchestrated platforms, solutions, and services working in tandem to drive sustainable energy and transportation.”

Tesla has created a vertical alignment that plays into this perspective about the necessity of “holistic ecosystem interplay.” Yet, a New Yorker exposé on CEO Musk captured a tenuous cog in the Tesla wheel. Writer Ronan Farrow opined that “it is difficult to say whether Musk’s interest in AI is driven by scientific wonder and altruism or by a desire to dominate a new and potentially powerful industry.” Acknowledging that FSD and its AI foundation have the potential to be game-changers, Farrow suggested, “Musk isn’t peddling pabulum. His initiatives have real substance. But he also wants to be on the show—or, better yet, to be the show himself.”

That Musk tendency has continued to have both positive and negative effects on Tesla shares and will likely continue into the future.