It is not being a good year for Tesla. With an environment of rate hikes and an economic slowdown (with strong recession warnings), investors have fled en masse from cyclical firms and have taken cover in defensive stocks or, especially, in public debt. Elon Musk’s foray to take over Twitter hasn’t helped either. However, the company has already advanced 47% in just four months.
The car firm maintains an uncertain future in the current context and accumulates one problem after another this 2022. Apart from the complicated macroeconomic situation, the supply problems with respect to China, where they have one of their gigafactories, weigh especially. Although the return to normality in the West has been active for some time, in China the war against covid is still very much present and lockdowns and outbreaks have continued to be the norm in many cities, weighing down production and damaging demand in the country.
This situation, added to the general situation of the economy, caused the company to lose almost half of its value in the first five months of the year. However, now it has managed to stop the bleeding and, in the overall calculation for the year, it has reduced losses to 22.97%.
One of the big turning points to consolidate the rebound was the results of the first half of the year. In the second quarter, Elon Musk announced that, despite earnings that disappointed analysts ($16.9 billion), he made a profit of $1.95 billion, compared to losses that everyone took for granted due to rising manufacturing costs and Logistics.
This 253% half-yearly increase in profits (5,577 million dollars) caused the market to approach the firm with a different approach. To begin with, Tesla, with its Chinese factory closed, had achieved the highest vehicle production in its history with 258,000 vehicles and 254,000 deliveries. In the process, it had raised operating margins to 14.6%, one of the highest in the industry.
Elon Musk’s company managed to raise the prices of all its models and manage to improve its profits at a time of fragility for the sector, news that helped consolidate a rebound that had already been underway for a month and that began with the abandonment of Musk of his offensive to take over Twitter.
In addition, Tesla has been one of the big beneficiaries of Biden’s tax, climate and health care bill. In short, the White House project against climate change has pushed the firm upwards since it began to be promoted, until it was finally approved in the Senate at the beginning of August.
Biden will offer $7,500 in aid to buy electric vehicles
This bill offers US consumers public credits of 7,500 dollars for the purchase of electric vehicles, in addition to a spending program of 400,000 million for consumers to adopt electric cars and renewable energy.
In this sense, the market sees this law as a guarantee that the demand for electric cars will remain firm, that the transition to electric cars will be promoted despite the crisis and, especially, that opportunities will be promoted for companies such as Tesla, for example, with the commitment to greater production of lithium and microchips, a key element for the manufacture of these vehicles.
Finally, it should be noted that Tesla carried out a Split of its shares so that their value drops from $900 per title to $300. A measure that according to Josh Gilbert, market analyst at eToro, tends to very sensitively encourage increases in the stock market. “The data shows that there is an uptick in retail ownership and often a jump in share price after a split. Since 1980, S&P 500 companies that have announced stock splits have earned an average of 25.4% in the following 12 months.
war on wall street
Despite all the analysts are deeply divided on the future of Tesla and whether in the current context it is time to buy or sell. The Bloomberg consensus gives Elon Musk’s signing a -3% potential. Although firms such as Credit Suisse believe that it will continue to rise until it reaches 333 dollars (it is now trading at 307), others such as BNP Paribas defend that it will fall to 180. The division among experts is absolute, with Deutsche Bank giving it the 400 dollars , thus achieving levels prior to 2022 and touching its all-time highs of November 2021 ($407 per share after the split).
The consensus, although very divided, shows that 55% of analysts believe that it is time to buy, given that it will rise more, while 25% choose to stay and 20% to break positions in the face of further falls.
There are many arguments to think that Tesla can continue to fall given the economic context and that this summer has only been a correction after excessive bleeding. However, there are also many who, protected by their results and the countries’ commitment to electrification, believe that this is only the beginning and that the rebound could only be the beginning of a true comeback like few have seen in such a short time. on Wall Street.