Dear clients,
Shares of Tesla Inc. continued its breakneck rally on Thursday, doubling from the lows hit in early January, boosted by growing appetite for growth and technology stocks and signs that demand for its electric vehicles is recovering.
Shares closed up 3% to $207.32 in New York, posting a 104% gain from their January 6 intraday low. Stocks are rebounding from a 65% drop in 2022.
Riskier growth stocks, which fell hard last year amid fears of rising interest rates and a recession, rebounded sharply in 2023 as optimism about the economy returned and investors are betting that the Fed’s cycle of aggressive rate hikes comes to the end. At the same time, Tesla’s own earnings over the past month and a flurry of positive news about tax breaks have provided further gains for the company, headed by Elon Musk.
In early February, the Biden administration said it would expand a recently revised electric vehicle tax credit to SUVs up to $80,000. The move is positive for Tesla, analysts said. The company is also seeing a surge in demand for vehicles after a significant price cut in January, allowing it to raise prices slightly.
However, Tesla’s 68% growth this year is well above that of the Nasdaq 100, which is up 13%, and the NYSE FANG+, which is up 28%. The rush of speculative trading in recent weeks, as retail traders rushed to buy shares of their favorites, may partly explain this exuberance, given Tesla’s popularity with individual shareholders. Vanda analysts note that large retail flows into the stock are expected ahead of the company’s investor day on March 1, when Musk is expected to unveil the third version of his „master plan.“
Despite a strong January rally, the electric car maker’s shares are still 49% behind since their all-time high of $409.97 hit in early November 2021. And while some investors say the worst may be over for Tesla, others are urging caution as the risk of a recession still lingers and the electric car industry’s strong growth is expected to slow in the near term.
