Tesla Bulls Rally Again: Morning Brief

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If Tesla can be a tech company when car sales falter, it can certainly be a car company when sales beat expectations. That’s how Wall Street sees it, as Tesla’s rally once again heads higher.

Over the past week, Tesla shares have surged more than 25%, boosted by vehicle deliveries that beat estimates, leaving the meager gains of the rest of the Super Seven in the dust.

When CEO Elon Musk insisted earlier this year that Tesla was not a car company, the message sent the stock soaring even as sales faltered. Convenient as it was, the message was honest enough. The decree seems to go both ways.

The stock’s surge suggests the power of promoting an industry-leading product—a lesson for AI startups—and the benefit of making AI ambitions part of a broader business plan, not the only one. But it also underscores that Tesla’s AI goals remain inextricably linked to its car sales.

Combining lofty technical ambitions with moving cars off the lot has been central to Musk's sales skills.

“In short, the worst is in Tesla’s rearview mirror, as we believe the EV demand story is starting to come back to the troublesome tech company,” Dan Ives, an outspoken Tesla supporter, wrote in a note earlier this week.

Optimistic delivery data counters a wave of negative sentiment.

Faced with stiff competition in China, slumping demand at home, price cuts, layoffs, and Musk’s legal and corporate drama, Tesla has been floundering on its path to becoming a top 7 company. But recent wins have a way of erasing previous losses. Now Tesla is riding a winning streak, with an earnings report and the unveiling of a buzzy robotaxi on the way.

Investors have started buying Tesla shares amid this shift in sentiment. Since their lows in late April, the company’s shares have risen more than 60%.

But even some Tesla supporters are sharply critical of the recent rally. Tesla has beaten expectations, but its sales are down compared to the same period last year. And how have more aggressive competitors and cheaper prices affected profitability?

“In fact, Tesla’s EV sales are down 5% and the company seems to be giving up on selling EVs. Now it’s all about SUVs and taxis.” Ross Gerber saidCEO of Gerber Kawasaki Wealth & Investment Management, referring to fully autonomous driving.

In some ways, Tesla’s flexible identity as a car company in good times and a technology company in bad times may be a barrier to a clear corporate strategy. Is Tesla still aiming to put an electric car in every home? Or is it a platform that operates a fleet of self-driving taxis to push the boundaries of AI technology?

The story continues

It could be both, of course. Musk tends to want it all. And investors don’t seem to mind what day the company wears. As long as the numbers are up, AI can do it. And now, cars can do the same.

Hamza Shaaban is a Yahoo Finance reporter covering markets and economics. Follow Hamza on Twitter @Hishaban.

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