Elon Musk, CEO of Tesla and SpaceX, listens attentively during a Q&A session at the SATELLITE Conference and Exhibition in Washington on March 9, 2020.
Tesla's stock (TSLA) ended Tuesday up by around 4%, marking its tenth consecutive day of gains.
This positive streak has completely erased Tesla's losses for the year so far, pushing the stock up by about 5% since January. Since hitting its lowest point in the past 52 weeks back in April, Tesla shares have surged by a whopping 75%.
Analysts attribute this surge to Tesla's strong performance in vehicle production and deliveries during the second quarter, which exceeded expectations on Wall Street. There's also growing enthusiasm around Tesla's ventures into artificial intelligence.
"The market is suddenly recognizing Tesla's potential for growth," said Seth Goldstein, an equity strategist at Morningstar, in an interview with Yahoo Finance. "First-quarter deliveries fell short of expectations, leading the market to anticipate slower growth. That's why we're seeing this significant rally now."
Tesla is scheduled to announce its next quarterly results on July 23 after the market closes. The company has hinted at developing more affordable electric vehicles, which investors view as another catalyst for future growth.
However, Goldstein cautioned that Tesla needs to provide a clear and concrete timeline for the rollout of these vehicles, initially expected as early as 2025.
"We need to see these plans met or even accelerated so that Wall Street can anticipate another wave of growth in deliveries starting in 2026," he explained. "As long as Tesla maintains this narrative, I believe the stock will remain stable. But any delays or uncertainty from management could cause the stock to falter."
In addition to earnings and deliveries, investors are eagerly anticipating Tesla's entry into the robotaxi market. The company plans to unveil its highly anticipated robotaxi on August 8.
Earlier this year, Tesla's stock experienced a significant downturn following its fourth-quarter financial report, which fell short of both revenue and profit expectations. The disappointment continued with a 9% year-over-year decline in vehicle deliveries during the first quarter, raising concerns among investors about Tesla's lofty valuation and the demand for its electric vehicles in the United States.
Following the delivery miss, Tesla announced a reduction of more than 10% of its workforce. Analysts interpreted these layoffs as a troubling sign for the company's future.
Moreover, competition from Chinese electric vehicle manufacturers such as Lucid (LCID), Li Auto (LI), Nio (NIO), and XPeng (XPEV) has intensified, leading to a price war that forced Tesla to slash prices aggressively to remain competitive.
As a result, short sellers targeted Tesla, betting on its decline — but they have faced significant losses amid its recent rally.
"Short sellers have had a roller-coaster ride with Tesla over the past few years. It was the most shorted stock in the market. Now it's fourth, behind Nvidia, Apple, and Microsoft," explained Ihor Dusaniwsky, managing director at S3 Partners, during an interview with Yahoo Finance on Tuesday. "But Tesla remains a major focus for short sellers. It's still a big deal for them."
