- Tesla’s stock endured many trials and tribulations over the past year – but now it’s back on track.
- After a record plunge in 2022, the Elon Musk-owned company’s shares have rebounded sharply this year.
- Here’s a timeline of the dramatic events that drove Tesla’s tumultuous ride in the stock market over the past year or so.
Tesla’s stock is on a roll this year.
Just seven weeks into 2023, it has already surged 64% and several analysts are predicting a further rally in the EV maker’s shares. Veteran Wall Street trader Keith Fitz-Gerald sees the stock gaining a further 48% while Barclays’s Dan Levy projects a 36% upside.
It’s a stunning reversal of fortunes from 2022, when Tesla suffered a precipitous plunge in market value as a series of dramatic events – including the Federal Reserve’s aggressive interest rate hikes and CEO Elon Musk’s $44 billion Twitter takeover – spooked investors.
Thanks to the dramatic swings in investor sentiment, the past 12 months or so possibly marked the most turbulent phase on record for one of the high-profile names in the equity market. The EV maker’s market capitalization, which hit a record high of over $1.2 trillion in late 2021, plunged to a low of $341 billion in December 2022, before surging back above $600 billion as of this week.
George Soros, Steve Cohen, and Jim Simons’ funds piled into Tesla and other trendy names last quarter, while Jim Chanos took aim at meme stocks. Here’s a roundup of 5 key trades.
1. Soros Fund Management
2. Point72 Asset Management
3. Renaissance Technologies
4. Bridgewater Associates
5. Chanos & Company
Here’s a timeline of key events over the past year that have fueled Tesla’s rollercoaster ride in the stock market.
March 2022: Tesla opens European plant
Tesla opened it’s first European factory near Germany’s capital, Berlin. The so-called Gigafactory received the green light to produce 500,000 vehicles per year and employ 12,000 workers. Its launch sent shares in the electric-vehicle manufacturer surging nearly 8% followed by a rally till month-end.
April 2022: Musk’s $44 billion Twitter deal
In April last year, Musk agreed a deal to buy Twitter for $44 billion. The takeover plan sent Tesla shares plunging by more than 12% to wipe out $126 billion in value in just one day, as investors feared the billionaire CEO may sell some of his stock in the EV maker to finance the buyout.
Before the official deal, Tesla shares continued to extend losses in the subsequent weeks, resulting in a cumulative 23% drop in April.
May 2022: Twitter tantrums continue
Tesla’s stock continued to be under pressure throughout May as investors digested Musk’s deal to take Twitter private.
Then, in a fresh twist, the buyout plan was thrown into doubt with Musk threatening to cancel the deal saying the social-media giant was “actively resisting” his efforts to study fake accounts. Shares in the EV maker then rose more than 5% after Musk announced the deal was on hold.
October 2022: Delivery targets missed
The automaker’s shares slid throughout October after it reported third-quarter results that missed analysts’ estimates. The company said it produced 365,923 vehicles and delivered 343,830 in the third quarter, which stamped a new record but were below the expected number of about 358,000.
It’s stock dropped 8.6% on the report, to the lowest level in three months.
November 2022: Twitter angst returns
By the end of October, Musk officially became the owner of Twitter. The takeover continued to weigh on the Tesla stock into November as investors feared Musk’s focus on the automaker will be limited as he is distracted by his responsibilities at the social media company.
Early in November, Musk revealed he sold $4 billion worth of Tesla shares after closing his buyout of Twitter. The EV maker’s stock sank to their lowest level in 2 years on the news.
December 2022: Fed tightening, China woes
By the end of December, Tesla’s stock was down by about 65% for the whole year, thanks to a combination of factors including Musk’s chaotic Twitter purchase, a gloomy economic backdrop and a slowdown in demand from China, the world’s largest market for electric cars.
Musk himself pointed to the Federal Reserve’s aggressive interest-rate increases – aimed at cooling inflation – as the primary reason for Tesla’s declines. Rising interest rates tend to weigh on growth stocks such as Tesla because they make borrowings more expensive, chipping away at the company’s future cash flows.
“In simple terms: as bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop,” the world’s second-richest man tweeted to defend himself against the stock plunge.
Meanwhile, COVID-19 infections in China led to a fall in production at its Shanghai factory, which is its largest worldwide plant by output. Shares in Tesla fell after the company announced it will run a reduced production schedule at its Shanghai plant.
January 2023: A new year, a new Tesla
A steady decline in inflation has fueled investor expectations that the Fed could stop raising interest rates or even start cutting them later this year – and that has been good news for the EV maker.
That, coupled with a strong quarterly report of record profits, helped fuel a fresh rally in Tesla, which saw its market capitalization rebound above $500 billion.
February 2023: Price cuts spark EV demand
So far this month, Tesla has powered higher and higher. That’s due in large part to a series of recent price cuts announced by the EV maker, which were seen to reignite demand in the Chinese market.
The automaker sold 55,796 vehicles in China in January, according to data published Friday by the China Passenger Car Association – up 18% from December and 10% from a year ago.
The stock also rallied thanks to news of a wider US tax credit for electric vehicles. Under the Inflation Reduction Act, more Tesla vehicles can qualify for EV tax credits of up to $7,500 per car.