Why Tesla Stock Roared Back Last Week

The market found numerous reasons to be cheerful after a tough period for the company.

It seems that for many investors, Tesla (TSLA 15.31%) is a company that can do no wrong. Despite publishing an earnings report that showed worrying declines in key metrics and a double miss on analyst estimates, the company’s stock rose last week. According to data compiled by S&P Global Market Intelligence, the leading electric-vehicle (EV) company enjoyed a more than 14% lift across the last five trading days.

First quarter somehow not a flop

Tesla reported its first-quarter earnings after market hours on Tuesday, and they didn’t look good at all. Revenue declined by 9% year over year, while non-GAAP (adjusted) earnings plummeted by nearly 50%. Both figures came in notably under the consensus analyst projections.

That difference between the rates of decline was due mostly to Tesla’s aggressive cost-cutting. The EV space has become more competitive at a time when such vehicles are no longer a novelty. Customers are less willing to pay a premium for a good that’s becoming commonplace.

The usual reaction to a lousy quarter is a widespread share sell-off, but the opposite happened with Tesla. It seems investors were encouraged by CEO Elon Musk’s insistence that, regardless of the company’s numerous difficulties with advanced technology in the past, the company has a bright future with products such as its promised robotaxi and autonomous EVs. Tesla bulls were also cheered by the company’s aim to produce lower-priced EVs.

Price-target bumps

In the wake of the earnings report, several analysts hiked their price targets on the stock, including Citigroup‘s Itay Michaeli. Writing in a new research note that the company’s first quarter was “better than feared,” Michaeli added $2 per share to his target for a new level of $182. This doesn’t make him a bull, however, as he maintained his neutral recommendation.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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