Aditya Soni and Reshma Rocky George
(Reuters) – Tesla shares rose about 10% on Wednesday after the electric car maker eased some concerns about slowing growth, predicting sales will rise this year and plans to launch more affordable models in early 2025.
Investors were bracing for the worst after a tumultuous week at Tesla (NASDAQ:) that included major layoffs, executive departures, price cuts and the postponement of a highly publicized meeting with India’s prime minister.
The new plans also helped Wall Street shrug off the company’s weak first-quarter results, which included lower-than-expected profit and the first drop in quarterly revenue in nearly four years.
“Our first impression is that CEO Elon Musk is calming the market by accelerating new product launches,” Jefferies analysts led by Philippe Houchois said in a note.
Tesla was on track to add about $50 billion to its $460 billion market value. The stock has fallen 42% this year through its last close as high borrowing costs have dampened demand for electric vehicles and a price war intensified in China’s main market.
Tesla’s growth strategy could bolster support for a shareholder vote in May on Musk’s $56 billion compensation package, which was overturned by a Delaware court in January.
Some Tesla investors such as Ross Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management, have said in recent days they plan to oppose the package, citing Tesla’s declining share price and compromised management.
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“UNHAPPY MODEL Y/MODEL 3”
Some analysts took Tesla’s remarks that its cheaper models would be built using current platforms and production lines as a sign that the company has abandoned more ambitious plans for an all-new model that was expected to cost $25,000 .
“We think of ‘more affordable’ as potentially legacy versions of the Model Y/Model 3 with improved software and AI/hardware capabilities, but at lower prices,” said Morgan Stanley analyst Adam Jonas.
Musk has refused to provide details on more affordable models and has instead spent most of the profits on Tesla’s efforts to diversify its business into artificial intelligence, humanoid robots and operating a fleet of autonomous vehicles – all based on the software and hardware products it owns Not yet. fully developed.
Investors and analysts have long praised Tesla for efforts such as its driver-assistance technology.
Tesla shares trade at a PE ratio of 57.38 times forward 12-month earnings, significantly higher than Ford’s (NYSE:) 7.06 and General Motors’ (NYSE:) 4.80.
Tesla shares jumped to around $160 a share in early trading, according to data analytics firm Ortex. That’s the price at which short sellers have lost $1.62 billion on paper since Tuesday’s close.
However, short sellers’ profits are still up nearly $8 billion this year.
“Although the details (of the new models) are unclear, it was a smart move by Musk as it justifies the negative cash flow and higher capital costs,” said Kathleen Brooks, director of research at XTB.
“Unlike many companies that are cutting capital expenditures in the current environment, Tesla is going against the grain… and puts it in a strong position as the electric vehicle market becomes more competitive and price sensitivity increases,” Brooks added.
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