It’s always hard to call
Tesla
‘s stock price reaction to any event. For starters, it’s hard to know what the company will say or do. It’s even harder to know how high, or low, investor expectations are coming into a vehicle delivery report, earnings report, investor day or product launch.
Expectations were not to high headed into Tuesday evening’s annual meeting of shareholders.
Tesla
(ticker: TSLA) stock is up in early Wednesday trading.
The shares are up 1.4% in premarket trading at almost $169 a share.
S&P 500
and
Nasdaq Composite
futures are up 0.2% and 0.4%, respectively.
The most obvious reason for the bump is CEO Elon Musk. He’s going to spend less time at Twitter and will keep running his car company. “It ain’t so,” said Musk, responding to a question about rumors he could step down at
Tesla,
like he said he will at Twitter.
That answer allayed investor fears. The meeting had some other, pleasant, surprises for investors. Tesla will try advertising. Musk committed to doing that in response to another question. The crowd cheered his answer.
Investors like the news, but ads show again that the bigger that Tesla gets, the more it begins behaving like a traditional auto maker.
Smaller auto makers such as
Ferrari
(RACE) don’t need to advertise. They have no problem selling out their production. But Ferrari’s annual output is measured in the tens of thousands. Tesla’s is measured in the millions and growing. It’s harder to sell out that amount of production.
Ford Motor
(F) and
General Motors
(GM) spent $2.2 billion and $4 billion on advertising, respectively, in 2022. The $6-plus billion figure represents roughly 2% of the companies’ combined 2022 sales. That’s an expense, but GM and Ford, of course, believe they get branding and sales benefits.
Musk also teased two new products he said could sell five million units a year. That’s a lot. The best selling car models on the planet sell roughly 1 million units a year.
One of those new products is likely a hatchback or baby crossover vehicle, says Gary Black, cofounder of the
Future Fund Active ETF
(FFND). Black, and other investors, have been waiting for a smaller, less expensive Tesla model for a while.
Cybertruck production is also expected to commence in the summer, pointed out Canaccord analyst George Gianarikas in a Tuesday report. He rates Tesla shares Buy and has a $257 price target for the stock.
“Musk also made bullish comments regarding recent improvements in its self-driving technology, saying he believes Tesla will achieve [truly self driving cars] this year,” wrote CFRA analyst Garrett Nelson in a Wednesday report. “While history has shown that Musk’s predictions should be taken with a grain of salt, we do think Tesla is leading the autonomous driving race.” He rates shares Buy and has a $250 price target for Tesla stock.
There are some concerns still. Bernstein analyst Toni Sacconaghi noted that Musk continues to warn that the coming year will be tough for all auto makers due to economic headwinds and high interest rates.
He also has concerns that Tesla’s product lineup is stale. The company needs new models. Sacconaghi rates shares Sell and ahs a $150 price target for the stock.
For now the positives outweigh the negatives and Tesla stock is up. Shares fell 6.6% after the 2022 annual shareholder meeting. No really big bad news came out of that event. Investor expectations headed into it must have been high.
Write to Al Root at [email protected]
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