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Tesla Stock Is Up 10.2%: What’s Helping It Defy Gravity?

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Tesla stock up 10.2%

Tesla (TSLA) stock appears to be defying gravity today and is rallying despite the broader market sell-off. Today at 1:08 PM EDT, Tesla stock was up 10.2% from the previous session’s closing price. In comparison, the S&P 500 Index and the NASDAQ Composite Index each dropped 1.1%.

During the same timeframe, auto stocks (XLY) General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) were up 2.4%, 1.6%, and 2.2%, respectively. Let’s look at the factors driving this optimism in Tesla stock.

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Positive factors

Earlier today, Citron Research—one of the Tesla bears—surprised the market by turning positive on TSLA for the first time. According to a Reuters report, Citron Research’s latest note said, “With a great deal of analysis and due diligence that we can say for the first time, Citron is long Tesla.”

The Reuters report added that Citron mentioned, “Tesla is destroying the competition, snatching customers from BMW, Mercedes, Toyota and Honda.”

It’s noteworthy that on September 6, Citron Research short seller Andrew Left filed a lawsuit against Tesla and its CEO, Elon Musk, alleging the violation of federal securities laws.

According to a CNBC report, “The lawsuit alleges Musk manipulated the price of Tesla shares by issuing materially false and misleading information, according to a copy of the suit which was posted online and confirmed as authentic by the well-known short seller Left.”

This move came about a month after Musk’s August 7 tweet about “taking Tesla private” and having “funding secured.”

Earnings expectations

Tesla (TSLA) is slated to announce its third-quarter results on October 24 after the market closes. According to the latest consensus estimate compiled by Thomson Reuters, Tesla is expected to report adjusted EPS of -$0.19 in the third quarter.

While this EPS might not look impressive, it’s significantly better than Tesla’s adjusted EPS of -$2.92 in the third quarter of 2017 and its adjusted EPS of -$2.45 in the second quarter. Analysts expect Tesla to turn profitable in the fourth quarter and report adjusted EPS of $0.72.

Analysts’ rising expectations about Tesla’s upcoming earnings and the news of Citron Research’s positive views could be the two primary factors fueling today’s rally in its stock. Investors are expected to closely watch Tesla’s third-quarter results tomorrow after the market closes, as these results are expected to reflect its progress toward becoming a sustainably profitable company.

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