What Boosted Tesla Stock Yesterday?



Tesla stock (TSLA) had a great start this week. On Monday, the stock rose 6.45% to $381.5, which marked its two-year high. In general, US stocks were robust the same day. All three of the major indexes closed at their all-time highs. The S&P 500 (SPY) closed 0.71% higher at 3,191,45, while the industrials-heavy Dow Jones closed 0.36% higher at 28,235.9. The tech-heavy Nasdaq also hit its all-time high with 0.91% gains.

US stocks benefited from recent developments on the US-China trade war front. China’s economic data also boosted market morale. On December 15, China suspended tariffs on US goods including cars. Recently, the US and China signed Phase 1 of the trade deal. As a part of the deal, China will buy substantially more agriculture produce from US farmers. However, Tesla stock didn’t just get a boost from trade deal optimism.

China Gigafactory updates boosted Tesla stock

Updates about Tesla’s China Gigafactory drove the rally in the stock on Monday. Colin Rusch, an Oppenheimer analyst, covers Tesla stock. In a note, he said that “expectations for a relatively smooth (production) ramp of Tesla’s China facility are increasing.” Rusch’s assertion is based on an assumption that Tesla has learned from ramping up the production of Model S and X as well as Model 3 in the US. As a result, the company should have a relatively smoother ramp up in China. He also expects Tesla to achieve its goal of 360,000 deliveries in 2019.

While Tesla’s ramp-up prospects look good, China’s auto industry doesn’t. China’s auto sales fell 3.6% in November, which marked a decline for the 17th consecutive month. In November, new energy vehicle sales fell more than 43%. Tesla will have to push Chinese consumers to buy Model 3 amid the slowdown. Interestingly, the company is pushing Chinese consumers to buy made-in-China Model 3s.

Analysts’ recommendations

Tesla also received a boost from Credit Suisse analyst Dan Levy’s comments. While talking about Tesla’s competitive advantage, Levy said, “We believe Tesla is leading in the areas that will likely define the future of carmaking – software and electrification.” Talking specifically about Tesla’s lead in batteries, he said, “Tesla is likely ahead of others on batteries – the core of the electric powertrain.”

Interestingly, Credit Suisse is still a big Tesla stock bear. Levy has a “sell” rating on the stock with a target price of just $200. In other words, he expects the stock price to almost halve over the next 12 months. Last month, Levy said, “Ford’s new [electric vehicle] should provide a more compelling alternative at the Model 3 price range than the other comps, especially given the performance focus.”

Analysts are still mixed about Tesla stock. Among the analysts surveyed by Reuters, 33% recommend a “buy” rating. Meanwhile, 39% are bearish and 28% are cautious with a “hold” recommendation. The mean target price is way below Tesla’s current stock price. Read Why Are Analysts Divided on Tesla Stock? to learn more.

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