Tesla stock is rising, while the overall market is trading lower on Tuesday.
Andrew Caballero-Reynolds/AFP via Getty Images
It’s a down day for the market, but Tesla stock continues its recent run. Figuring out exactly why isn’t easy.
The S&P 500 is down 0.4% in early Tuesday trading. The Dow Jones Industrial Average has given up about 0.8%. Tesla (ticker: TSLA) stock, on the other hand is up 2.5% as of 11:30 a.m. Eastern time. What gives?
The biggest reason doesn’t seem to be a new bullish analyst or an official statement from the company. The reason seems to be a new one—even for Tesla. Rising optimism is based on tweets about an email that may or may not be real.
It seems that CEO Elon Musk may have written an email to employees endorsing Cathie Wood’s $3,000 price target for Tesla stock. ARK Invest’s Wood believes that target can be hit by 2025. Musk believes that price is possible if Tesla executes “really well,” according to the email.
Whether or not the email was sent by Musk isn’t known. Tesla didn’t respond to a request for comment. If it was, or wasn’t, is moot for investors Tuesday. Shares are rising again as the story circulates.
Solid execution for Tesla likely means opening up new manufacturing and battery capacity on schedule. Tesla is opening two plants—one in Texas and one in Germany—this year. The company wants to grow unit volumes at 50% for the foreseeable future. Part of that growth will be expanding product lines into more vehicle segments. Tesla has hinted at a $25,000 vehicle for a while. That would likely arrive around 2023.
Tesla would also need to make significant progress with its autonomous driving software. Wood believes that Tesla can have a fleet of self driving robotaxis by 2025. That business is a big reason for her bullish price target.
Achieving full self driving technology—to the level that would allow driverless cabs—isn’t a given though. And other car companies are developing self driving technology too. And other technology companies—such as Waymo and the Motional joint venture between Hyundai Motor (005380.Korea) and Aptiv (APTV)—are working on robotaxis.
Who will be successful, by when and what the technology will all be worth is difficult to call. The Future Fund ETF (FFND) managing partner Gary Black doesn’t include robotaxi sales in his projections. He believes self driving software can generate some recurring sales and help Tesla sell more Teslas.
Tesla stock is up about 7% year to date. But shares have recovered recently, rising more than 25% over the past three months. Strong demand for EVs across the globe as well as interest rate rises not being as bad as feared are two reasons for the recovery.
Write to Al Root at [email protected]
