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Last Updated on: 3rd April 2025, 12:26 am
Obviously, as with anyone else “explaining” why a stock unexpectedly rose or dropped on any given day, I can’t give you any definitive answer. However, let’s give it a quick shot, including some thoughts on the potential reasons.
First of all, note that Tesla delivered 336,681 vehicles last quarter, which is a 13% decrease year over year (YoY). Generally speaking, in the business world, declining 13% YoY is not seen as a good thing. With a “growth stock company” like Tesla, where sales are supposed to be growing 50% a year, that should really, really not be a good thing. However, following the sales news, the price of Tesla stock (NASDAQ:TSLA) rose 5% today. There are a few possible explanations for this.
1) Perhaps stock traders expected an even worse sales report, and thus bought stock on the news that it was “only” a 13% year-over-year drop in sales. To me, that seems a bit unlikely and generous on its own, as the stock price has not dropped enough since the target was 50% growth a year to make this make sense. Even just one year ago, Elon Musk said they expected Tesla sales to increase in 2024. Sales didn’t increase, they decreased, and now they’ve even decreased considerably more than they did last year, but Tesla’s stock price is up 68% compared to a year ago. Make it make sense.
2) Another reason that has been floated is that Musk is reportedly going to be leaving Washington, D.C., and his DOGE work soon in order to focus more on Tesla again. It seems people think that’s a good thing for Tesla and are treating that news as a “buy” sign. To me, a) it seems like a manufactured distraction more than anything in response to the poor Tesla sales figures, b) it’s not clear how Musk is expected to help Tesla while spending more time in the office again, and c) why has it been okay and basically written off that Musk has been “phoning it in” at Tesla for a long time? Was there enough of a move downward from Musk’s political distractions to have the stock get a bump of this size from the news that he might be returning to work in a few months?
3) The market is bullish that the new Model Y is ramping up, that sales didn’t take more of a hit while retooling and preparing the production lines for that, and because traders think there will be enough demand for the new Model Y to get a big sales rebound and get rapid growth going again. However, there’s word on the street that the backlog of demand in China is already burned up (which would be a disaster for the company) and there are no strong indications that the new Model Y bump will be more than a little blip of support. It might be more, but we don’t really have proof of that right now.
Well, there’s one more possibility. That would be the fact that there are millions of Elon Musk fans who think the company and stock can only go up, so any drop in the stock price should be capitalized on ASAP by “buying the dip.” That actually seems to work to some extent and for some time period, but if sales continue to disappoint, reality will catch up with the company and the market will eventually respond. As I explained recently, Tesla may be a meme stock, but the hype around that meme can last for hours, or even days and weeks.
We’ll see what happens in the coming days and weeks as more data comes out, but the first quarter numbers don’t look good — unless you ask the stock market.
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