Tesla Inc. stock continued its rally on Friday, adding nearly 35% to weekly gains as investors cheered the electric vehicle maker’s profits and reassurances from top executive Elon Musk that demand is not an issue at Tesla.
Tesla shares closed at their highest level since December 9, when they closed at $179.05. The stock also extended its winning streak to a sixth day, rising 41% in that span.
The weekly gains of 33% were the best since the week ended May 10, 2013, when the stock rose 40.7%.
Tesla reported mixed quarterly results on Wednesday, with sales slightly below Wall Street’s expectations, but Wall Street has focused on optimism in Tesla’s 2023 production outlook.
CEO Elon Musk also said he wanted to “allay concerns” that Tesla was having demand issues. January orders are stronger than ever and demand is far outstripping Tesla’s production rate.
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Tesla earlier this month cut prices for its electric vehicles in the U.S. and Europe by as much as 20% depending on region and model, but Musk said the price cuts would make Tesla vehicles more attractive to buyers.
Other well-received news items on Wednesday included the announcement that a “next-generation” vehicle platform is in the offing, with details at Tesla Investor Day on March 1, and that production of the Cybertruck, Tesla’s electric pickup truck, is scheduled for a later date is this year and for series production in 2024.
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On Friday, Morgan Stanley’s Adam Jonas added his voice to those who think the price cuts, far from being a sign of trouble for the electric vehicle maker, may have ushered in a new era of electric vehicles and “great deflation.”
“While it is early days after Tesla’s price cuts, we believe history will reflect this period as the moment when changes in design, manufacturing technology and scale enabled profound deflation in electric vehicle prices,” Jonas said.
Changes in industry composition and market share may take years to materialize, “but we believe competing EV players (startup and legacy) may need to fundamentally rethink their EV forecasts and manufacturing schedules,” he said.
Deflation “changed the competitive landscape in the auto space,” and prices fell even more after Ford Motor Co. introduced its Model T and revamped its assembly line, Jonas said.
However, Tesla stock has yet to catch up to the broader market. Shares are down about 35% over the past 12 months, compared to losses of about 5% for the S&P 500 index. SPX, +0.25%