Tesla Stock Continues to Defy Expectations

Tesla stock has a remarkable track record of surpassing expectations, and the trend continues in December. Despite falling estimates from Wall Street analysts, the shares are on the rise, leaving investors wondering what is driving this growth.

Impressive Growth in December

In early trading on Tuesday, Tesla shares saw a 1% increase, outperforming the S&P 500 and Nasdaq Composite, which experienced gains of 0.2% and 0.3% respectively. With a 6% increase for the month, Tesla is outpacing the Nasdaq by one percentage point.

Concerns below the Surface

However, beneath this seemingly strong performance, there are some concerns emerging. Wall Street estimates for fourth-quarter deliveries have been revised down from 490,000 units to approximately 473,000 units, according to FactSet. Similarly, projections for Tesla's 2024 deliveries have decreased from 2.3 million units to around 2.1 million units. The anticipated earnings for 2024 have also dropped from $4.67 per share to $3.85 per share over the past couple of months.

Analyzing the Impact

Typically, falling estimates can dampen stock prices. However, in Tesla's case, analysts and investors may view these revisions as a positive development. RBC analyst Tom Narayan, for instance, believes that Tesla's 2024 sales estimates have been "de-risked." Consequently, he has adjusted his unit sales estimate to 2.1 million units from 2.3 million units while slightly reducing his target price to $300 per share. Narayan rates Tesla stock as a Buy.

The Bigger Picture

Narayan's confidence in Tesla's stock stems from its potential in self-driving technology. Despite the minor adjustments made for near-term estimations, he maintains a valuation of over $900 billion for Tesla, primarily based on the company's advancements in autonomous driving.

Tesla's ability to defy expectations has once again left industry observers amazed. While Wall Street estimates may have revised down, there is still immense optimism surrounding Tesla's future prospects, particularly in the field of self-driving technology.

Tesla's Strong Chinese Sales Boost Stock Price

De-risked numbers and strong Chinese sales are driving Tesla's stock higher in the market. Alongside other factors, the impressive performance in the Chinese market has had a significant impact on Tesla's overall sales.

Tesla's China sales have recently witnessed considerable strength, as reflected in weekly insurance registrations. While Tesla does not disclose monthly sales volumes or specifics regarding geographical sales, data suggests that the company has already sold approximately 140,000 units in China so far. This projection puts Tesla on track to set a new quarterly record of around 165,000 units. Comparatively, Chinese industry associations reported that Tesla sold about 156,000 units in China during the second quarter of 2023.

The positive results in the Chinese market are particularly valuable at this time since Tesla is currently selling its upgraded Model 3 in China. The strong demand for this refreshed model indicates promising sales prospects for Model 3 vehicles in 2024.

Aside from Tesla-specific factors, there are external reasons contributing to the stock gains. Federal Reserve officials anticipate cutting interest rates three or four times in 2024. Lower interest rates mean reduced monthly car payments, relieving pressure on auto manufacturers to lower prices. This development is favorable not only for Tesla but for the entire automobile industry.

It is crucial to consider various factors when analyzing stock prices, such as company-specific factors, market conditions, and economic indicators like interest rate expectations. Investors should thoroughly assess these aspects to gauge the short- and medium-term trajectory of any stock.

At present, the combination of these factors is driving Tesla's stock higher, resulting in an impressive surge of more than 80% over the past year. Undoubtedly, this has been a fruitful period for Tesla shareholders.