3 Reasons Why Tesla Shares Are Running Higher
Since reporting 97,000 third-quarter deliveries on October 2, shares of Tesla Inc. (NASDAQ: TSLA) have risen on nine consecutive trading days and were well on their way to a 10th on Thursday. Following that delivery report, the company’s stock price dropped by about 4.2% to close at $233.03 on October 3. On Wednesday, shares closed at $259.75, for a gain of nearly 11.5%.
Tesla’s third-quarter deliveries did not live up to CEO Elon Musk’s “shot” at a target of 100,000 deliveries, and the stock was punished for missing a goal it never really set. Maybe one day Musk will catch on that words have meaning and will be a little more circumspect in what he says. Or maybe not.
Still, Tesla appears to be taking advantage of its share price jump by raising prices on several versions of its entry-level Model 3 sedan. The company is betting that the performance improvements justify a slightly higher base price for its single-motor standard range plus, dual-motor long range and dual-motor performance LR versions. The sticker price for the entry-level single-motor standard version remained unchanged at $35,400. Including a destination charge of $1,200 and a federal tax credit of $1,875, the standard Model 3 rings in at $34,725.
The sticker price on the standard range plus version is now $39,490 (slipping to $38,815 with destination and tax credit included) while the long-range dual motor version has a sticker price of $47,990 ($47,315 inclusive). The performance LR’s sticker price rises to $56,900 ($56,315 including destination charge and tax credit).
Tesla boosted the range on its standard range plus version from 240 to 250 miles and lowered the 0 to 60 time of its long range version from 4.5 seconds to 4.4 seconds. The long range and performance LR versions have a range of 310 miles. There’s no better time to raise prices than when a company’s doing well, and Tesla figured this out.
The company also may be getting a boost from Ford Motor Co. (NYSE: F), which announced Thursday that it has struck a deal with electric vehicle charging firms Greenlots and Electrify America to create a FordPass Charging Network at more than 12,000 charging stations around the country with around 39,000 plugs. Customers who purchase a Ford EV will get two years of free charging at the stations.
Ford’s all-electric Mustang-inspired SUV, the company’s first all-electric vehicle, is due to hit dealer showrooms next year. The company already sells plug-in hybrid versions of its Fusion sedans, along with hybrid versions of the Fusion and the Explorer SUV.
Ford also made a deal with Amazon.com Inc. (NASDAQ: AMZN) that authorizes Amazon Home Services to sell installation services for home charging units.
This kind of activity is both bad news and good news for Tesla. As more automakers enter the all-electric market, Tesla may suffer from the competition or it may benefit from the validation that carmakers like Ford, Porsche, GM, Volkswagen will bring to the market.
Given CEO Musk’s predilection to overstatement, It’s easy to forget that Tesla has more experience building electric vehicles than any other carmaker. It’s new Shanghai plant, which received its first shot of electricity from China’s State Grid power utility on Thursday, was built from the ground up in less than nine months, and the company plans to be producing 1,000 Model 3 sedans a week at the plant by the end of this year. That is light-speed by auto industry standards.
Not only does the Shanghai plant afford Tesla local access to China’s vast market, but it could also be a template for expansion into other regions like, say, the European Union. Musk himself suggested in 2017 that the company had its eye on a full European plant (it currently has a final assembly plant in the Netherlands). Sales in Europe tripled year over year in the first half of 2019, even as auto sales in Europe have cooled off. Tesla is reportedly near a decision on the location of a European Gigafactory (northwest Germany is apparently in the driver’s seat), and Musk has said that European production could “probably” begin in 2021.
Tesla stock traded up about 1% in the noon hour Thursday, at $261.35 in a 52-week range of $176.99 to $379.49. The 12-month consensus price target on the stock is $246.46.