Tesla Shares Surge Following Musk's Optimistic Sales Forecast

 

Tesla shares experienced a remarkable surge on Thursday, closing up nearly 22%—the largest single-day increase in over ten years. This gain was driven by CEO Elon Musk's optimistic forecast regarding future sales, which reassured investors about the company's commitment to its core business of electric vehicle (EV) sales. By the end of the trading session, Tesla's market value increased by approximately $150 billion.

Musk projected a sales growth of 20-30% for the upcoming year and announced plans to introduce an affordable vehicle by the first half of 2025. He also highlighted improvements in production efficiency that contributed to enhanced profit margins in the third quarter.

During the trading day, Tesla’s stock reached a session high of $262.20, with around 200 million shares changing hands. This significant increase marked the company's largest gain since May 2013 and helped recover recent losses that had stemmed from concerns that Musk was distracted by new ventures, such as the recently introduced robotaxi.

While Musk has been steering Tesla toward becoming a player in artificial intelligence and robotics, he has yet to provide a detailed business plan for this new direction. Earlier this month, following a robotaxi event that lacked substantive details, investor confidence waned, leading to a sell-off of Tesla shares. Ed Egilinsky, managing director at investment company Direxion, noted that the recent rally may simply be a relief response following better-than-expected earnings.

In the previous quarter, Musk made headlines with announcements unrelated to vehicle sales, discussing topics ranging from driverless taxis to humanoid robots, which left some investors anxious about the potential for dwindling profit margins due to ongoing price cuts.

Jessica Caldwell, head of insights at Edmunds, remarked that Musk appeared more passionate and engaged during this earnings call, suggesting that the company had improved in providing essential information to investors about its future. Caldwell emphasized the need for clarity on how Tesla plans to achieve its ambitious goals.

Tesla's third-quarter financial results exceeded Wall Street expectations, with production costs per vehicle hitting a record low of approximately $35,100. The company also reported $326 million in revenue from its Full Self Driving (FSD) software, which is utilized in its Cybertruck and other autonomous features. Seth Goldstein, equity strategist at Morningstar, stated that while FSD contributed to the margin increase, the primary driver was a reduction in unit production costs.

Musk reiterated his vision for Tesla to provide paid, driverless ride-hailing services by next year, aligning with promises made at the robotaxi event. However, this ambitious plan may encounter substantial regulatory hurdles.

Despite the positive outlook, not all investors are fully reassured by Tesla's latest announcements. Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a notable Tesla investor, expressed his desire for Musk to concentrate on the fundamental aspects of the business rather than on robotaxis and artificial intelligence. He reflected on Musk’s earlier, more hands-on approach, stating, “The days were good when Elon slept at the factory. He was there every day, working. Not going on Trump rallies of all things he could be doing.”