What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 3.4% in the afternoon session after Melius Research initiated coverage on the stock with a "Buy" rating and a price target of $520. This optimistic view was supported by another analyst action, as Evercore ISI Group raised its price target on the company's shares from $235 to $300, although it kept its "In-Line" rating.
Additionally, a company executive announced (according to Reuters) Tesla's key Shanghai factory will ramp up production in the fourth quarter, signaling an increased ability to meet strong global demand. This boost in potential output suggests higher future revenues.
Contributing to the positive momentum, the major indices rebounded as signs of easing trade tensions between the U.S. and China emerged over the weekend.
The tech-focused Nasdaq Composite jumped around 1.7%, while the S&P 500 gained 1.2%. This rebound follows a significant sell-off the previous trading day, which saw the Nasdaq plummet 3.6% and the S&P 500 sink 2.7% after threats of new tariffs heightened fears of a trade war. Investor sentiment improved after the U.S. President adopted a more conciliatory tone toward Beijing in a social media post. The shift in language helped calm market jitters and spurred a broad-based rally as investors welcomed the potential de-escalation of the trade dispute.
After the initial pop the shares cooled down to $426.78, up 3.3% from previous close.
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What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 3.3% on the news that the company unveiled a more affordable, stripped-down version of its Model Y, which disappointed investors who had hoped for an entirely new vehicle.
The move followed a 5.5% gain in the previous trading session, which was fueled by speculation over a teased product launch. However, the reveal of cheaper versions of the Model Y and Model 3, priced at $39,990 and $36,990 respectively, was met with less enthusiasm. The new variants were seen as a move to revive demand after the expiration of a $7,500 federal EV tax credit at the end of September.
Also, a confluence of negative economic data pointed to a weak economy. The latest Survey of Consumer Expectations from the New York Fed revealed that households' short-term inflation expectations are rising, while their outlook on the labor market is deteriorating. Consumers expressed greater concern about potential job losses and expect lower earnings growth, factors that directly impact discretionary spending.
Adding to the unease, Chief Economist at Moody's Analytics, Mark Zandi, warned that 22 states are already showing clear signs of a recession, placing the broader U.S. economy in a precarious position. The ongoing U.S. government shutdown further dampens sentiment, threatening to weigh on incomes and purchasing power.
Tesla is up 12.5% since the beginning of the year, but at $426.78 per share, it is still trading 11.1% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $2,867.
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