- Tesla’s stock is up 63% this year so far thanks to investor optimism and strong Q4 earnings.
- Shares in Elon Musk’s EV maker have erased almost all of their 2022 losses in just six weeks.
- It shed over $700 billion in market value last year as interest rates rose and Musk took over Twitter.
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Tesla‘s stock has started the year with a breakaway rally that’s clawed back almost all the electric-vehicle maker’s losses from a hellish 2022.
Shares are up 63.4% year-to-date, trading at just over $201 as of Wednesday’s closing bell.
That gain means that Tesla is close to erasing the $700 billion wipeout it suffered last year, just six weeks into 2023.
The stock slumped 65% in 2022 as rising interest rates dampened investors’ appetite for riskier bets and shareholders worried that Elon Musk’s chaotic $44 billion takeover of Twitter would drag on Tesla’s share price.
But Tesla has staged a dramatic comeback in the early going of this year, thanks to investors’ growing faith that interest-rate cuts are coming and a strong fourth-quarter earnings report that beat Wall Street forecasts.
The Federal Reserve has raised the cost of borrowing from near-zero to around 5% over the past year, in a bid to tame soaring prices. But a growing number of traders think the US central bank will start cutting rates later in 2023, given inflation has fallen six months in a row.
Rate cuts would typically boost growth stocks like Tesla, as they juice up the future cash flows that make up a core part of their valuations.
But Tesla has beaten those benchmarks, in part because of its most recent earnings report and an aggressive price-cut strategy that appears to be paying off as rival automakers scramble to match the move.
The carmaker logged earnings-per-share of $1.19 for the three months up to December 31 – way clear of Wall Street’s $1.05 forecast, according to Refinitiv.
Its fourth-quarter revenue grew 37% year-on-year to $24.3 billion, narrowly beating analysts’ $24.1 billion target. The and could show shareholders that recent aggressive price cuts have helped to revive previously faltering demand.
In January, Tesla slashed the US prices of its Model 3 sedan and Model Y SUV by as much as 20%. While those cuts will dig into the company’s margins, Bank of America strategists believe they could boost sales.
That means Tesla could rally 35% this year, as its recent price cuts have already been a success in China, Wedbush’s Dan Ives has said. Loup Ventures’ Gene Munster is also positive on the company, even though he believes the cuts will put pressure on earnings.