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Why Tesla Stock Stomped on the Accelerator in June

Motley Fool - Mon Jul 3, 2023

What happened

Tesla(NASDAQ: TSLA) stepped on the accelerator in June, with shares climbing 28.3% according to data provided by S&P Global Market Intelligence. That's more than four times the 6.5% gains of the S&P 500 index and adds to its blistering rally so far in 2023, with the stock up more than 127%.

While a rebound among technology stocks was undoubtedly a contributing factor, the electric vehicle (EV) maker gained additional momentum and had numerous catalysts over the past month that helped drive the stock higher.

A Tesla Model 3 speeding along a deserted road.

Image source: Tesla.

So what

Likely the most significant contributor to Tesla's stock performance in June was the tidal wave of carmakers adopting its North American Charging Standard (NACS) charging port and joining Telsa's Supercharger Network. Ford announced its decision in late May, but June brought similar announcements from General Motors, Rivian, Volvo and Polestar Automotive. There are also reports that Hyundai and Volkswagen are mulling a similar decision.

Other developments also boosted Tesla shares. Early last month, Telsa announced that all of its Model Y and Model 3 vehicles are eligible for the full $7,500 federal tax credit under the revised guidelines for EVs. When combined with other state and local incentives, these tax credits make several Tesla cars comparably priced to their counterparts with internal combustion engines.

Rounding out a month of good news was word that during the first quarter, Tesla's Model Y became the best-selling vehicle on the planet, according to automotive industry publication Motor1. The report noted that this was the first time an EV had accomplished this feat. Tesla outsold the popular frontrunners, including Toyota RAV4 and Corolla.

Now what

There were plenty of reasons for Tesla shareholders to celebrate last month, but there's evidence that the company may just be getting started.

On Sunday, Tesla announced its production and delivery numbers for the second quarter, and (if you'll excuse the pun) "delivered" far better results than investors had hoped. Tesla produced 479,700 vehicles during the quarter and delivered a record 466,140.

Investors must wait until Tesla reports its second-quarter financial results on July 19 to get the whole picture. Tesla had cut prices several times during the past three months to help bolster sales, so investors will be keen to know the impact of these discounts on Tesla's margins.

Still, enigmatic CEO Elon Musk has repeatedly shown that he's playing the long game. When questioned about whether he was starting a price war, he responded, "We're not 'starting a price war,' we're just lowering prices to enable affordability at scale," he wrote in a post on Twitter.

To be clear, Tesla's valuation is enough to make any value investor light-headed. The stock sells for 52 times forward earnings and 6 times next year's sales, so it isn't for the faint of heart. That said, the company's success thus far in revolutionizing the EV market suggests it's worthy of a lofty valuation. And valuation -- like beauty -- is in the eye of the beholder.

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Danny Vena has positions in Tesla. The Motley Fool has positions in and recommends Tesla and Volkswagen Ag. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.

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