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Tesla (TSLA) Closes at Record High: Model 3 Driving the Stock

Zacks Equity Research
·3 min read

Tesla, Inc. TSLA shares rose more than 7% on Monday, closing at a record $949.92, surpassing the Feb 19 all-time high of $917.42. The company’s shares benefited from a report by the China Passenger Car Association (CPCA),per which the electric-car maker tripled its Model 3 deliveries in China in May.

Chinese car sales jumped in May for the first time since June 2019 and Tesla's cars were among the country's top-selling new energy vehicles. Notably, sales of the made-in-China version of Model 3 totaled 11,095 in May, up from 3,645 in April and 10,160 in March.

In April, Tesla’s vehicle registration in China fell to 4,633 from a record 12,710 a month earlier, when the company resumed production at its Shanghai Gigafactory following the coronavirus crisis-led shutdown.The company has lowered prices in China twice in the last two months due to decline in vehicle demand on the coronavirus mayhem.

With China being the first nation to recover from the coronavirus pandemic, the Shanghai gigafactory factory reopened before the other ones, driving Model 3 sales in the country. Notably, the EV maker is heavily reliant on its China sales to shield itself from the pandemic-induced low vehicle demand in other major markets. Tesla intends to expand its Supercharger network in the country, in order to support the new volume of vehicles in its fleet. Shares of Tesla have appreciated 127.1%, year to date, compared with the industry’s rise of 34.7%.

With the Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the EV segment. Strong performance and impressive design of the firm’s products are bolstering sales volumes. Rising Model 3 delivery, which forms a major chunk of the automaker’s overall deliveries, is aiding the company’s topline. Revenues are likely to rise further as it expects to make good progress on Model 3. Along with Model 3, Model Y will also boost Tesla’s prospects in the upcoming period. Notably, the deliveries of the latest Model Y began in March— significantly ahead of schedule— and contributed to the company’s profits.

For full-year 2020, the company expects vehicle deliveries to exceed 500,000 units. The first-quarter 2020 deliveries remained robust despite the coronavirus crisis. Higher volumes will enable Tesla to achieve cost and production efficiencies, thereby strengthening its margins.

Zacks Rank & Other Stocks to Consider

Tesla currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the same sector are Halfords Group Plc HLFDY, Adient PLC ADNT and Niu Technologies NIU. While Halfords sports a Zacks Rank of 1, Adient and Niu carry a Zack Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Halfords have rallied 31.2%, year to date, as against its industry’s decline of 7.9%.

Shares of Adient have appreciated 4.8%, year to date, as against the industry’s decline of 8%.

Shares of Niu have gained 35.4%, year to date, as against the industry’s decline of 8%.

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