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Why Tesla Stock Rallied 20% in November

Motley Fool - Mon Dec 4, 2023

It seems like there's never a dull moment for Tesla(NASDAQ: TSLA) shareholders. November was certainly an active month for the company and the stock. Investors were rewarded as Tesla stock gained 19.5% for the month, according to data provided by S&P Global Market Intelligence.

Part of the reason for the gains was the long-awaited rollout of Tesla's unique Cybertruck. The company promised to start deliveries of its newest electric vehicle (EV) offering, and it held the official launch event for the product.

But there were other reasons for the stock's advance, too.

Tailwinds from several directions

News directly related to the company was also aided by macroeconomic tailwinds last month. Markets in general rose as investors believe the Federal Reserve's rising interest rate cycle may be coming to an end. Tesla CEO Elon Musk called out those higher rates in the company's third-quarter conference call in October as a reason for a slowdown in demand for EVs.

Musk said consumers simply can't afford to buy new cars "if interest rates remain high or if they go even higher." So the growing feeling that the Fed's rate increases have peaked had investors jumping back into growth stocks like Tesla.

In addition to that tailwind, Tesla announced a deal to sell its vehicle charging equipment to a second customer. The first report that Tesla was directly selling its charging hardware to a third party came in October in a $100 million deal with energy company BP.

But it was the Cybertruck that brought the most excitement last month since investors have been waiting for it since it was unveiled in November 2019. Its specifications are now official, with a price tag as high as about $100,000 for its high-end version, the CyberBeast. That trim has an estimated battery range of 320 miles. The all-wheel-drive version will cost an estimated $80,000 with a range of 340 miles. The base model -- which won't be available until 2025 -- will cost about $61,000 with a 250-mile battery range.

The party might be over for now

Now that Cybertruck sales have begun, investors will be looking at the other tailwinds for near-term gains. The truck will likely not have a meaningful impact on Tesla's earnings even next year as less than 100,000 are expected to be sold in 2024.

But Musk himself may have disrupted any other tailwinds for Tesla stock. In a candid public interview he did at the 2023 DealBook Summit in New York on Nov. 29, Musk discussed problems with losing advertisers at his social media company X (formerly Twitter). He presented a potential path for that company to end up in bankruptcy.

The problem for Tesla shareholders is that Musk may want to sell Tesla stock to help prevent his social media company from folding. Additionally, he has debt owed to banks from when he purchased Twitter. If the company can't turn a profit to help cover that debt, it's very possible that Musk will unload Tesla shares to pay it.

That doesn't mean that Tesla won't still be a good investment in the long run. But Tesla's growth should be considered more of a marathon than a sprint. And with potential stock sales from Musk in the nearer term, the stock may be giving back some of those November gains before it goes higher.

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Howard Smith has positions in Tesla. The Motley Fool has positions in and recommends BP and Tesla. The Motley Fool has a disclosure policy.

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