Why Tesla Stock Jumped Yesterday

tsla stock yesterdayTSLA Stock Touches Record High Monday

Tesla Inc (NASDAQ:TSLA) stock has been on an upward trajectory since it announced its fourth-quarter deliveries. Although it missed the target by a whisker, sentiments have been quite bullish over the launch of the “Model 3” later this year.

Tesla stock jumped by more than four percent and closed at $280.60.

On Monday, CEO Elon Musk launched his company’s electric vehicles in the United Arab Emirates (U.A.E.). This market expansion is good for Tesla Inc and the price of TSLA stock as the Middle East is expected to be a big market for the company’s luxury cars and sport-utility vehicles.

The company will soon accept online orders for its “Model S” sedan and “Model X” SUV. The online platform launch will also be supported by a pop-up store in the Dubai Mall and a service center in Dubai, which is expected to open in July. (Source: “Tesla makes foray into Middle East,” The Wall Street Journal, February 13, 2017.)

Tesla has already deployed many charging locations in the U.A.E. and will add many more by the end of 2017.

Last week, Elon Musk had also given a hint about launching in India, when he tweeted the following.

TSLA stock is up more than 31% in the year-to-date in contrast with the four-percent returns posted by the S&P 500 Index in the same time period. Besides the market expansion for the existing Tesla models, the upcoming Model 3 has already generated a lot of excitement. More than 370,000 customers have pre-ordered their Model 3 cars, and investors are getting optimistic that Tesla Inc may ultimately achieve its target of 500,000 Model 3 units by the end of 2018.

There was a report last week that the company was shutting down its California assembly plant for a week to prepare for production of its mass-market Model 3 sedan. This would happen sometime in February, as the company plans to begin production of its highly anticipated low-priced electric vehicle in the month of July. (Source: “Exclusive: Tesla pausing factory for Model 3 preparation this month,” Reuters, February 8, 2017.)

Tesla Inc said that the “brief, planned” pause would let the company increase capacity of the current paint shop in preparation for Model 3. Sources have also told Reuters that the company has plans to begin test-building the Model 3 on February 20. Tesla Inc had also confirmed earlier that the Model 3 drive unit would be produced at its “Gigafactory,” which has already started manufacturing batteries.

All these developments have led investors and analysts to believe that the Model 3 could change the fortunes of the company and TSLA stock. The following chart shows the astounding rise of Tesla stock, which gained almost 55% in the time period when the S&P 500 index rose by 14%.  

Tesla stock chart

Chart courtesy of StockCharts.com

However, this does not mean that TSLA stock is not without its risks. The movement over the past year has been quite volatile and there was a lot of uncertainty surrounding the company when Donald Trump was elected President. But the recent turn of events has made investors more confident that the Trump presidency could be a big positive for Tesla stock.

Elon Musk has been in the news lately over his meetings with President Donald Trump. He had been advising Trump on matters related to the travel ban, as well as on climate change.

The political uncertainty surrounding TSLA stock has also come down substantially by the recent new job announcements by the company. With Tesla Inc being the automaker that has all its production in the Unites States right now, the company and its stock appear to be in a sweet spot right now.

Investors are optimistic ahead of Tesla’s February 22 results announcement. The general view is that the Model 3 production would go as per the schedule. It looks like nothing can halt the rise of Tesla stock right now.