(News Bulletin 247) – Since June 25, the car manufacturer has recovered more than 40%, driven in particular by sales volumes above expectations. But not all the lights are green.

Just a few months ago, Tesla was suffering the biggest decline in the S&P 500 through 2024. Even Boeing, mired in its endless struggles with its 737 Max, was not falling as much as the electric carmaker.

Fierce competition from Chinese manufacturers, disappointing financial results with 2024 announced as less ambitious in terms of volumes, a sharp slowdown in the adoption of electric vehicles and the procrastination of Elon Musk who threatened to separate Tesla’s artificial intelligence technologies, are all elements that explained the fall in the stock.

But the tide has completely reversed in a matter of weeks. Since July 5, Tesla shares have erased their losses and returned to positive territory for the entire year. Better still: at the close on Tuesday evening, Tesla had chained no less than ten consecutive sessions of increases. Between July 25 and Tuesday evening, the stock has recovered 43.7%.

>> Access our exclusive graphic analyses, and enter the confidence of the Trading Portfolio

Reassuring deliveries

Tesla has added about $240 billion in market capitalization (the value of all its shares) in the space of two weeks. And its stock is now up 5.6% since January 1.

Obviously this stock market rally is not built on sand. Even though this announcement came before the series of 10 sessions of increases, the approval by Tesla shareholders of Elon Musk’s mega-compensation plan (between 46 and 55.8 billion dollars), which had been rejected in early 2024 by the courts, has somewhat reassured, last month. A negative vote left the threat of Elon Musk’s demobilization hanging over him.

Above all, Tesla’s stock was buoyed by its second-quarter delivery figures on July 2. At 443,956 units, these vehicle shipments were down 5% year-on-year, but they were stronger than analysts had expected (437,812 units). These figures mainly surprised investors and hedge funds who were likely expecting mediocre deliveries.

“The investors we spoke to were expecting weak numbers,” Bank of America said.

The manufacturer’s shares jumped 10.2% on the day of this publication and 6.5% the following day.

A justified rally?

But is Tesla’s impressive rally justified? The group’s previously mentioned problems have hardly gone away. Despite being bullish on the stock, Morningstar expects Tesla deliveries to be slightly down for the full year of 2024 compared to the previous year. The potential re-election of Donald Trump as president of the United States next fall is an additional source of concern, as the Republican candidate has said he plans to roll back previous policies that have encouraged the development of electric vehicles.

As Bloomberg rightly points out, Tesla has ultimately given more reasons to sell its stock than to buy it this year, and its rally may seem “incomprehensible,” the agency says. Chris McNally, an Evercore analyst cited by Bloomberg, noted last week that demand for the company’s electric vehicles has been broadly flat over the past seven quarters and called the stock’s rally after its second-quarter deliveries were “aggressive.”

“Ultimately, Tesla could enter a new phase where the stock price disconnects from the company’s current fundamentals in the hope of future growth and enthusiasm for artificial intelligence,” UBS said.

Right after the publication of probably rather lackluster quarterly results on July 23, Tesla will organize a “robotaxi day” on August 8. This event will allow the company to take stock of its progress in autonomous vehicles, future models and its efforts in artificial intelligence.

Eternally optimistic, Dan Ives of Wedbush believes that this day will be “historic” for Tesla and will be “a catalyst” for the stock. “The key for Tesla stock going forward is for the stock market to recognize that Tesla is the most undervalued AI company on the market in our view,” he explains. The analyst has a price target of $300 on Tesla, which gives the stock a potential upside of 13%.