Elon Musk defies doubters, sending Tesla to largest daily gain since 2011

Elon Musk has once again left skeptics in the dust. Tesla stock, TSLA, shot up by 20%, adding $150 billion to its market cap.

This is the company’s largest single-day spike since 2011. With a current market cap now surpassing $825 billion, the surge comes right after Tesla’s Q3 2024 financial report, which beat Wall Street expectations.

Strong numbers, big gains

On Wednesday, Tesla reported revenue of $25.2 billion and earnings per share (EPS) of $0.72, blowing past analysts’ expectations of $0.58.

Net income for the quarter jumped to $2.17 billion, an 8% revenue growth from last year. These results spurred the stock’s rise on Thursday.

The company’s profit margins benefited from $739 million in revenue from environmental regulatory credits. Automakers are required to buy credits if they can’t meet certain targets, and Tesla, being all-electric, has plenty to sell.

This revenue source, however, may not last forever, with analysts at JPMorgan pointing out that it might be an “unsustainable driver” of future earnings.

Tesla also cashed in on its Full Self-Driving (FSD) system, pulling in an additional $326 million in revenue. This came after Tesla made FSD available for the Cybertruck, which included a new feature called “Actually Smart Summon.”

CFO Vaibhav Taneja said during the earnings call that FSD is quickly becoming a key component of Tesla’s revenue stream. 

On that same call, Musk gave his forecast for 2025 vehicle deliveries. He expects Tesla to grow between 20% and 30%, citing lower-cost vehicles and the further development of autonomous driving. Analysts surveyed by FactSet, however, were more cautious, predicting a 15% delivery growth rate for 2025.

Morgan Stanley analysts called Musk’s 2025 prediction a “maybe,” and set their own estimate at 14%, saying the growth would depend on Tesla’s ability to offer cheaper models and more attractive financing.

Thursday’s rally wiped out Tesla’s year-to-date losses, leaving the stock up by 3% in 2024. It’s still trailing behind the Nasdaq, which has risen by 22% this year, but the sudden recovery is a sharp contrast to Tesla’s 18% decline earlier in the month.

Trump and Musk’s politics cause concerns

Meanwhile, retail shareholders have flooded Tesla’s forum with questions about Musk’s public comments on X (formerly Twitter), which he owns. One investor said that Musk’s political activism might be hurting Tesla’s sales or brand image, receiving 168 upvotes from fellow users.

Another question, which got over 500 upvotes, asked if Tesla’s board was doing anything to ensure that Musk’s political engagement wasn’t distracting from the company’s core mission.

While Musk’s public support for Trump has made headlines, it hasn’t been a major topic in shareholder meetings or analyst discussions. Yet, with Tesla’s stock performance so closely tied to Musk’s persona, investors are worried.

Musk, who holds multiple high-profile roles as CEO of Tesla, SpaceX, and X, has also founded companies like xAI, Neuralink, and The Boring Co. Recently, he’s taken on the task of advising Trump on forming a “government efficiency commission” to cut spending and regulations, further entangling his corporate and political ventures.

But despite the political noise, Wall Street analysts are sticking to Tesla’s numbers and potential. FactSet compiled notes from analysts, and none of them seem overly concerned with Musk’s politics. They’re more focused on whether Tesla can keep delivering on its promises of growth and autonomy.

Analyst reactions

But some analysts are still wary of Tesla’s longer-term challenges. Morgan Stanley analysts were pleased with Tesla’s performance, calling the earnings report “one of the strongest Tesla prints in a while.” They reiterated their overweight rating on the stock, setting a price target of $310 per share.

Morgan Stanley also agreed that new, lower-cost Tesla models set to launch in 2025 could ease concerns over growth. Wells Fargo analysts weren’t as optimistic. They maintained an underweight rating, pointing to Tesla’s valuation, which they believe is too high.

According to Colin Langan, the market’s excitement over Tesla’s robotaxi ambitions isn’t grounded in reality. He doesn’t expect the robotaxi promises to be fulfilled until after 2030 and emphasized that regulatory issues would delay any major rollout.

Goldman Sachs took a more neutral stance. Analyst Mark Delaney set a price target of $250 per share, representing a potential 17% upside. Delaney said that the future of Tesla’s stock depends largely on its ability to deliver on its Full Self-Driving promises and meet its vehicle delivery targets.

He also said that stronger margins in the latest earnings report are a positive sign for Tesla. Meanwhile, Barclays analysts reiterated their neutral stance, setting a price target of $220.

While they acknowledged Tesla’s strong third-quarter results, they are concerned about Tesla’s AI and autonomous vehicle strategy, questioning whether the company can sustain its margins in the long term.

Bank of America was a bit more bullish. Analyst John Murphy raised his price target from $255 to $265, forecasting a 24% upside.

Murphy said that Tesla is positioning itself for a “second growth wave,” citing new product launches like the Cybertruck, a public ride-hailing app, and the expansion of Tesla’s energy storage business.