Tesla Bulls Are Riding Again: Morning Briefing

This is the main conclusion from today’s morning letter, which you can read to register to receive in your inbox every morning, along with:

If Tesla (TSLA) can be a tech company when auto sales falter, it can certainly be a car company when sales beat expectations. That’s how Wall Street sees it, as Tesla bulls are back on the rise.

Tesla shares have surged more than 25% in the past week on car deliveries that beat expectations, dwarfing the meager gains of the rest of the “Magnificent Seven.”

When CEO Elon Musk insisted earlier this year that Tesla is not a car company, the message shocked the stock price, even as sales were falling. While convenient, the message was true. And the edict appears to work both ways.

The stock’s surge is a testament to the power of touting an industry-leading product — a lesson for AI startups — and the benefit of making AI ambitions part of a broader business plan, rather than the only aspect of it. But conversely, it underscores that Tesla’s heady AI goals are still intimately tied to its car sales.

The combination of ambitious technological ambitions and selling cars is key to Musk’s sales pitch.

“In short, the worst is over for Tesla as we believe electric vehicle demand is returning to the disruptive tech mainstay,” Tesla backer Dan Ives of Wedbush Securities wrote in a note earlier this week.

The positive deliveries data counterbalances the wave of negative sentiment.

Fueled by rising competition in China, slowing demand at home, price cuts, layoffs and Musk’s own legal and business dramas, Tesla has been a Magnificent Seven laggard. But recent wins have a way of erasing past losses. And Tesla is now riding a winning streak, with an earnings report and a much-hyped robotaxi unveiling just around the corner.

Investors are buying into the changing sentiment. Tesla has risen more than 60% since a low in late April.

But even some Tesla backers are poking holes in the latest rally. True, Tesla beat expectations, but sales were down year-over-year. And how have more aggressive rivals and cheaper prices eroded profitability?

“In reality, Tesla EV sales are down 5% and the company appears to be capitulating to the idea of ​​selling EVs. It’s all about FSD and taxis now,” said Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management, referring to Full Self-Driving.

In a sense, Tesla’s fluid identity as a car company in good times and a tech company in bad times may be an obstacle to a clear business strategy. Is Tesla still looking to put a mass-market EV in every family’s driveway? Or is it a platform that orchestrates a fleet of autonomous taxis and pushes the boundaries of AI technology?

Of course, it could be both. And Musk is prone to wanting it all. Investors don’t seem to care which metaphorical hat the company is wearing on any given day. As long as the numbers go up. AI can do that. And for now, that includes cars.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.

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