Tesla’s Stock Soars: What Lies Behind the Recent Surge?

After a turbulent start to the year, the company owned by the ineffable Elon Musk has recovered and seems (once again) to be on the upswing. 

But back in April, analysts were still pessimistic.The company had reported a 10% year-on-year drop in sales in the first quarter of 2024. Among the reasons for the company’s loss of valuation were the number of promotions implemented in response to growing competition and demand yet to be solidified. Tesla’s inability to launch new products quickly enough to maintain customer interest, and its lack of innovation (criticisms that we often hear levelled at another famous company, Apple, to name but one) were also cited as factors undermining investors’ confidence.

Automated trading algorithms also played a significant role in the stock’s volatility, amplifying market reactions to both good and bad news. But with Tesla stock now approaching USD 210 per share, the curve seems to have reversed, and if we are to believe the same Cassandras who predicted the inevitable downfall of the darling of automotive technology, the worst is now in the company’s rear-view mirror.

Tesla’s rise on the stock market shows no signs of abating, underpinned by Tesla’s transition into a juicy and growing robotaxi business. According to a report from Ark Invest, a Tesla share could be worth around $2,600 by 2029, an increase of more than 1000% on its current valuation.

The success of a robotaxi service could turn traditional personal transport industries upside down. If Tesla manages to capture the fruits of this transition, it would generate substantial revenues, and therefore the value of the company.

However, to do so, Tesla faces a number of challenges and controversies, including regulatory hurdles related to autonomous driving, competition from other carmakers and technology companies, and issues of production scale, reliability and safety of autonomous vehicles.

Beware, however, that rosy predictions can lead to an overvalued share, and consequently to a subsequent market correction.

Mr. Musk’s sulphurous personality, to say the least, is no stranger to the ups and downs of the company’s share price, of which he is not the founder but the majority shareholder and public face. The $48 billion salary (at Tesla’s current share price) that he is set to receive in 2028 for his work at the company – i.e. nearly $5 billion a year – has been in the news for months, causing some major shareholders to jump on the bandwagon. The salary is based on an agreement annulled by the courts earlier this year, but now under appeal.