Tesla shares rose 33% this week, the best performance since 2013. On Friday, the stock closed at $177.88, up 11%. This rebound follows a 40% decline over the past six months and a 65% drop in 2022.
The rally was driven by a positive Q4 earnings report. CEO Elon Musk announced plans to potentially produce 2 million vehicles in 2023 and suggested demand would support sales. The official guidance is for 1.8 million vehicles this year, and the company has not changed its target for a 50% compound annual growth rate.
Total revenue was $24.32 billion, including $324 million of deferred revenue for driver assistance systems. The company cut prices for its cars in Dec and Jan, leading to concerns about demand and inventory. Reaction to the numbers was mixed, with some analysts seeing growth, while others saw a decline.
Tesla’s stock rise came amid a broader market rally, with the S&P 500 up 2.2% and the Nasdaq gaining 4.3%. Other EV makers saw their shares climb, including Rivian (22%), Ford (7%), and General Motors (7%). Rival EV manufacturer Lucid also rose 43% on reports of potential privatization by Saudi Arabia’s sovereign wealth fund.
Despite the rally, active short selling continues, with 94 million shares shorted, according to data from S3 Partners. Short sellers view Tesla’s appreciation as creating “an overheated and overbought stock that is due for at least a short-term reversal,” according to S3 Managing Director Ihor Dusaniwsky. Furthermore, Aswath Damodaran, a top finance professor, appraises Tesla’s real current value to be as low as $130.
When assessing the value of a stock, investors typically consider a variety of factors such as the company’s financial performance, market trends, and overall economic conditions. One way to determine if a stock is undervalued or overvalued is to compare its current market value to its intrinsic value.
Intrinsic value is the true worth of a stock and is determined by factors such as the company’s earnings, growth potential, and risk. A stock’s intrinsic value is usually calculated using various financial models, such as the discounted cash flow (DCF) model or the price-to-earnings (P/E) ratio.
If a stock’s intrinsic value is higher than its market value, it is considered undervalued. In this case, the stock may be a good investment opportunity as it is trading at a discount. On the other hand, if a stock’s intrinsic value is lower than its market value, it is considered overvalued. In this scenario, the stock may be overpriced and may not be a good investment opportunity.
Determining a stock’s intrinsic value is not an exact science and can be subject to interpretation and estimation. Furthermore, intrinsic value is not always reflected in the market value of a stock and can be influenced by market sentiment and investor psychology. Stock prices are also affected by various factors such as the company’s earnings, dividends, and future prospects. A company with a good earning history and consistent dividends will likely have a higher intrinsic value.
It is important for investors to conduct their own research and analysis when evaluating a stock’s value and not rely solely on the opinion of one individual or analysis.