In what could only be described as a financial rollercoaster ride, Tesla’s stock has made an astonishing comeback. For any avid trader or investor, understanding what led to this unexpected turnaround and the factors to consider before July 23 is essential for informed decision-making.
Tesla’s stock crashed in March of 2020 amidst a market sell-off due to the global COVID-19 pandemic which led to the worst economic crisis since the Great Depression. Fears of a prolonged shutdown of Tesla’s plants due to the pandemic pushed the high-flying electric vehicle maker’s shares to a low of $361.22. However, in what could be termed as an incredible rebound, Tesla’s shares surged, crossing the $1000 mark in June, a more than two-fold increase in the span of two months.
There were several contributing factors to this spectacular recovery. Tesla’s emphasis on better-than-expected deliveries in the second quarter played a crucial role. Despite the pandemic-related shutdowns, in June, Tesla reported the delivery of 90,650 vehicles, surpassing analysts’ expectations.
The result showcased Tesla’s ability to overcome logistical and operational challenges, convincing investors about Tesla’s resilience and growth potential. This led to increased demand for the stock, pushing its price higher.
The record sales in China also fuelled Tesla’s stock rally. Analysts have been bulls on Tesla’s China growth story, and numbers validated their forecast. The electric vehicle maker delivered 14,954 Model 3 sedans in China in June, marking a 35% month-over-month increase, dominating China’s new energy vehicle market.
Additionally, Tesla’s quest towards profitability seemed promising, delivering three consecutive profitable quarters leading up to the surge. If Tesla were to report a profit in its Q2 earnings which are set to announce on July 22 – a day before July 23 – it would be eligible to be included in the S&P 500, a milestone achievement.
Heading towards July 23, several factors are worth monitoring. Traders and investors are focusing on Tesla’s upcoming Q2 earnings report. A profitable Q2 would mark Tesla’s first full year of profitability, a key eligibility requirement as mentioned earlier for inclusion in the S&P 500 Index. The analyst community is divided on whether Tesla will meet this benchmark.
Another crucial element is the ongoing COVID-19 pandemic. A second wave of the virus could potentially result in another round of factory shutdowns, disrupting production. Tesla’s sales and delivery numbers could get impacted, causing a decline in the stock price. Therefore, investors should be cautious.
Lastly, the competition in the EV market is intensifying. Traditional automakers such as General Motors, Ford, and BMW are making significant strides towards electrification. This could impact Tesla’s sales and profitability in the future.
In conclusion, while Tesla’s stock comeback has been a great story, understanding the contributing factors and remaining vigilant towards forthcoming developments is crucial, specifically keeping July 23 as a notable date due to the revelations of the Q2 earnings report. By staying attentive to these cues, investors can make more informed decisions about whether to buy, sell, or hold Tesla’s shares.
