CEO Elon Musk’s prediction of up to 30% sales growth reignites investor confidence, leading to Tesla’s largest single-day stock gain since 2013

In a remarkable turnaround, Tesla’s stock surged nearly 22% on Thursday, marking its biggest single-day gain in over a decade and adding close to $150 billion to the company’s market value. The catalyst for this impressive leap came from CEO Elon Musk’s optimistic forecast of 20-30% sales growth for the coming year, coupled with promises of an affordable vehicle set to launch in the first half of 2025.

As the market closed, Tesla shares reached a session high of $262.20, trading volumes soared to approximately 200 million shares. This notable rise has revitalised investor interest, erasing previous losses stemming from concerns about Musk’s recent shift towards artificial intelligence and robotics, particularly in light of the newly announced robotaxi initiative.

Musk’s pivot to incorporate AI into Tesla’s core operations has drawn mixed reactions. Many investors had expressed unease after the recent Robotaxi event, which lacked the detailed business plan they were hoping for. This hesitation led to a sell-off earlier this month as fears mounted that Musk’s attention was divided among various ambitious projects.

Ed Egilinsky, managing director at investment firm Direxion, suggested that the recent stock performance could be characterised as a “relief rally.” He noted, “With the stock selling off in October before its earnings announcement, some bears feel this is more of a relief rally, as results were better than feared.” This sentiment was echoed by others who felt Musk’s passion during the latest announcements signalled a renewed focus on the automotive side of the business.

In the third quarter, Tesla reported margins that surpassed Wall Street expectations, with a significant reduction in the cost of goods sold per vehicle, which dipped to its lowest-ever level of approximately $35,100. This achievement was bolstered by the performance of Tesla’s Full Self-Driving (FSD) software, which generated $326 million in revenue from its autonomous features, including those found in the Cybertruck.

Seth Goldstein, an equity strategist at Morningstar, commented on the implications of FSD for Tesla’s profitability, stating, “FSD played a part in the margin expansion, but I think the larger driver was reduced unit production costs. Over time, FSD should drive higher long-term margin expansion.” The FSD technology is crucial for Musk’s vision of a fleet of driverless robotaxis.

Looking ahead, Musk maintained his forecast that Tesla vehicles will provide paid, driverless ride-hailing services by next year. However, he acknowledged that this ambitious plan would likely face significant regulatory hurdles. While Musk’s assurance of imminent developments may placate some investors, others remain sceptical.

Prominent Tesla investor Ross Gerber expressed concern that Musk’s current focus on robotaxis and AI diverges from the core automotive business that originally captivated investors. Gerber lamented, “The days were good when Elon slept at the factory. He was there every day, working. Not going on Trump rallies of all things he could be doing.” This criticism highlights a growing apprehension among stakeholders about Musk’s expanding interests beyond traditional automotive operations.

The fluctuating stock performance and ongoing debates about Musk’s leadership direction underscore the tension within Tesla as it balances its ambitious technological innovations with its foundational automotive business. With significant sales growth forecasted and ambitious plans for the future, the coming months will be critical for Tesla as it navigates both market expectations and regulatory landscapes.

As Tesla continues to innovate and adapt in an ever-evolving industry, all eyes will remain on Musk and his strategies to keep the electric vehicle giant at the forefront of the market.