Recent Surge in Tesla Stock: Exactly What Caused It?


Tesla Stock (NASDAQ:TSLA)

As of 11:30 a.m ET on Friday, Tesla stock was up 2.3% on news that the electric car market leader intends to increase its lead and maybe challenge BMW in overall sales volume.

What’s the Point Then

Documents obtained exclusively by Reuters reveal that Tesla (NASDAQ:TSLA) plans to create over 500,000 electric cars in the fourth quarter. That rate will be maintained or increased through 2023.

Simply the forecast for Q4 is astonishing. Even the most enthusiastic analyst tracking the electric vehicle manufacturer, from Citigroup, doesn’t think Tesla (NASDAQ:TSLA) produced more than 370,000 vehicles in the third quarter, which will be reported this weekend. In this case, a sequential growth rate of 35% would be met if production reached 500,000 cars or more significant in the fourth quarter. And Tesla (NASDAQ:TSLA) plans to create 1.6 million cars in the first three quarters of 2023, putting it on target to sell nearly 2.1 million EVs in total next year.

According to Reuters, if Tesla (NASDAQ:TSLA) were to achieve an annual manufacturing rate of 2.1 million cars, it would surpass Audi as a manufacturer and surpass BMW’s 2.5 million annual production rate.

What’s Next?

To put it mildly, this is a very lofty objective. It’s not totally unexpected, however, since Elon Musk, Tesla’s CEO, told investors in the previous quarter that he hoped to increase weekly production to 40,000 cars by the end of 2022. If you do the math, you get a number close to 2.1 million automobiles for 2023.

Tesla’s (NASDAQ:TSLA) rapid production expansion is also a sensible business strategy. Tesla stock will want to secure as much of the expanding market as possible. At the same time, competition is still light since rival automakers appear to announce new electric vehicles every week. Musk has called Tesla’s current Gigafactories in Texas and Germany “gigantic money furnaces,” so the company will want to ramp up production there to take advantage of economies of scale and reduce its cash outflow.

Investors should take heart from Musk’s track record of success in similar undertakings. Tesla stopped losing money regularly in 2019 after years of losing money. Over the last year, it has made more than $6.9 billion in cash earnings. The Tesla stock is not cheap at over 120 times free cash flow. Still, as Tesla increases production and profits, the stock will become more appealing to investors.

Featured Image-  Megapixl @ Colour59

See Disclaimer Please

About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.