Tesla shares surged in premarket trading on Wednesday, following positive announcements from the electric-car manufacturer that assuaged concerns about slowing growth.
According to Reuters, these announcements included upbeat sales projections for the year and plans to roll out more affordable models by early 2025. These initiatives helped offset concerns stemming from a tumultuous week for Tesla, marked by layoffs, executive departures, price cuts, and the postponement of a highly anticipated meeting with the Indian prime minister.
The positive news also helped mitigate concerns raised by Tesla’s underwhelming first-quarter performance, which included a lower-than-expected profit and the company’s first quarterly revenue decline in nearly four years.
Analysts at Jefferies were quoted by Reuters as saying, “First impression for us is CEO Elon Musk is appeasing the market by accelerating new product launches.”
The premarket surge in Tesla’s stock price, which currently stands at $460 billion, is likely to add nearly $50 billion to the company’s market value. However, Tesla’s stock has still declined by 42% this year due to elevated borrowing costs that have dampened demand for electric vehicles (EVs) and intensifying price competition in China, a key market.
Implementing Tesla’s growth strategy could bolster support for a shareholder vote scheduled for May regarding Elon Musk’s $56 billion compensation plan, which was struck down by a Delaware court in January. In recent days, some Tesla investors, including Ross Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management, have expressed their opposition to the package, citing Tesla’s declining share price and concerns about the integrity of the board.
Some investors may also find Tesla’s valuation noteworthy, with the stock trading at a forward estimated earnings PE ratio of 57.38, significantly higher than Ford’s 7.06 and General Motors’ 4.80.
Before the market opened, Tesla’s shares jumped to around $160 each, resulting in a paper loss of $1.62 billion for short sellers since the previous day’s close, according to data and analytics firm Ortex. Despite this recent setback, short-sellers have still accumulated nearly $8 billion in profits throughout the year.
