Tesla's monster rally rages on as analysts make an about-face ahead of the carmaker's annual meeting
AP Photo/Jae C. Hong
- Tesla surged Monday after logging its best week since October.
- Some analysts are becoming increasingly optimistic on the demand picture for Tesla's cars after those same fears drove shares lower by 46% this year.
- One Tesla analyst upgraded the stock Monday after he came away from meetings with electric-car makers in China more positive about demand there.
- The rally comes as Tesla is scheduled to host its annual shareholder meeting on Tuesday.
- Watch Tesla trade live.
Tesla shareholders, rejoice.
Shares of the electric-car maker jumped by as much as 6% Monday after a blockbuster week for the stock amid a string of positive commentary surrounding demand for Tesla's vehicles - one of the core issues that's plagued the stock in recent months.
Last week, Tesla posted its biggest weekly gain since October, surging by 10.5% and outperforming the broader market as stocks logged their best week of the year. Also buoying investor sentiment was a positive story about North American deliveries on the news website Electrek, said Craig Irwin, an analyst at the investment firm Roth Capital. Electrek tends to cover Tesla in a positive light.
"While we believe rising battery costs are likely to be a 2019 margin headwind, demand from China will likely be stronger than most anticipate, reducing the potential for lowered 2019 unit guidance," Irwin told clients Monday.
He upgraded Tesla to "buy" from "neutral" after coming away from four meetings with electric-vehicle producers in China more positive about demand there. This marks something of a change in tone for the analyst, who previously cut his price target twice this year amid several disappointing developments for the automaker.
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Other analysts have recently expressed optimism ahead of the company's annual shareholder meeting scheduled for Tuesday. Wall Street's increasingly positive view follows months of analysts cutting their earnings estimates, price targets, and investment ratings en masse.
Joseph Osha, a JMP Securities analyst and one of the more bullish Tesla voices, told clients last week that his checks show Tesla's second quarter looks better than the first, which was a massive disappointment for investors.
"The numbers show that more Model 3s were registered in April and May than during all of the first quarter, and it is important to note that Tesla's quarterly vehicle deliveries are typically back-end loaded," Osha told clients last week. "Demand for the Model 3 continues to be solid."
Another prominent Tesla watcher, Morgan Stanley analyst Adam Jonas, in May warned the stock could fall to $10 in a worst-case scenario. But in his latest note, he told clients he believes weak demand is "largely temporary."
"For the remainder of 2019, we expect a significant sequential improvement in demand driven by: continued European ramp, greater availability of leasing, Model S/X refresh, introduction of lower priced models and a number of price reductions," Jonas wrote last week.
Still, some investors are still betting the stock could tumble from current levels.
An unnamed investor on Monday effectively assumed a big short position in Tesla with a complex options strategy, a analysis from Susquehanna derivatives strategists showed.
"While not stock impactful at the time, the trading is interesting as it indicates where the investors think the bottom could be in shares (at month-end) and expresses a willingness to buy 800k shares there," about 13% below current levels, the strategists led by Alison Edwards wrote. "Further, it follows investors last week similarly getting short ~22k JunQ 190 puts."
Tesla is down 35% this year.
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