Shares in electric vehicle maker Tesla [TSLA] have bounced back in the last two weeks, boosted by the opening of a new factory in Germany and a proposed stock split. Yet challenges remain - particularly chip shortages and other supply chain disruptions that have been exacerbated by Covid lockdowns in China and the tragic events in Ukraine.
Ahead of the company’s Q1 earnings update next month, we look at the key developments shaping the Tesla share price and explore what the future may hold.
Tesla shares fighting back
After rising to a record high of $1,243.49 during intraday trading on 4 November last year, Tesla’s shares hit a few speedbumps. Chief executive Elon Musk sold around 10% of his stake in Tesla following a Twitter poll in November, causing the shares to lose about a quarter of their value over subsequent weeks, while the proceeds of Musk’s sale went towards a tax bill which he said came to more than $11bn. Investor sentiment was further dented by Tesla’s legal wrangle with JPMorgan over a disputed bond contract, plus wider market jitters over high inflation, the withdrawal of US stimulus measures and fears of an economic slowdown.
By 14 March, the shares had sunk to a closing price of $766.37, partly because of concerns over higher costs stemming from Russia’s invasion of Ukraine, which is contributing to surging prices for the raw materials that go into electric vehicle (EV) batteries, such as nickel, lithium and aluminium.
Since mid-March, however, Tesla’s shares have staged a fightback, climbing more than 40% in two weeks. On Tuesday the shares rose above the $1,100 mark before slipping back. This recent recovery has been driven by a number of positive news stories in the last fortnight.
Good news helps shares move up a gear
The shares received a significant boost on 22 March, as the first cars rolled off the production line at Tesla's new plant – or “Gigafactory”, in Tesla-speak – at Grünheide, east of Berlin. At the opening ceremony, which was also attended by new German chancellor Olaf Scholz, Musk danced like a tipsy uncle at a wedding, telling the assembled media, customers and employees that the new factory represented a step towards “a sustainable energy future”.
Tesla says that about 3,500 of the plant’s projected 12,000 workers have been hired, while JPMorgan estimates that the factory will produce around 54,000 cars in 2022. This is projected to rise to 280,000 vehicles in 2023, before hitting full capacity of 500,000 by 2025.
The new manufacturing capacity should help Tesla achieve its target of delivering more than a million vehicles this year. Last year, Tesla delivered 936,172 vehicles – an increase of 87.4% on the 2020 tally of 499,550.
Tesla’s mid-size SUV Model Y accounted for 97% of vehicle deliveries last year. The Model Y cars that customers collected from the plant in Grünheide last week cost €63,990 (£54,125; $71,000) and can be driven 514 km (320 miles) on a single charge. In a further boost to Tesla’s share price last week, car rental firm Hertz [HTZ] announced that it had added Tesla’s Model Y to its EV fleet.
A further stock market boost came this week. On 28 March Tesla shares leapt 8% following the carmaker’s announcement that it will ask investors to vote on a board-approved stock split at its upcoming annual meeting. Stock splits, which have also recently been announced by Amazon [AMZN] and Google-owner Alphabet [GOOG], make individual shares cheaper and arguably more appealing to investors, without altering the business’s underlying fundamentals. As a result, stock splits tend to boost valuations, and are generally seen as bullish for companies that carry them out.
Talk of the stock split, which may take the form of a shareholder dividend, diverted attention away from the news that Tesla is suspending production at its Shanghai factory this week, as the Chinese city enters another strict lockdown amid a surge in Covid cases.
Analysts sound note of caution
Despite ongoing supply chain challenges, positive headlines in the last two weeks have fuelled growth in the Tesla share price, helping it defy analysts’ consensus price target of $927.97, based on MarketBeat data. Integrating the views of 30 analysts, the financial data site gives Tesla a consensus hold rating, with the target price implying a roughly 15% downside on the 28 March closing price of $1,091.84.
It remains to be seen whether analysts’ price predictions prove correct. The proposed stock split may change the narrative, possibly helping to propel the shares back in the direction of the peaks we saw in November. In the near term, much will depend on Tesla’s Q1 results. That update is due to be issued on or around 27 April, with the exact date set to be confirmed closer to the time.