Tesla Stock Surge: A Mirage in the EV Desert?

Stocks to sell

Tesla (NASDAQ:TSLA) stock might be rallying, but electric vehicle maker still looks like a bad long-term investment idea. A fuse has been lit underneath Tesla stock. Since July 1, the company’s share price has risen 27%, erasing its previous losses on the year.

Trading above $250 per share, TSLA stock appears to have momentum behind it right now and could move higher in the short-term.

However, despite the current rally, Tesla stock remains down 10% over the last 12 months and is nearly 40% below its all-time high reached in November 2021 when the pandemic rally peaked.

Given the ongoing problems at Tesla, it is unlikely that the current rally in its shares is sustainable or likely to propel the stock to new heights.

Not as Bad as Feared

The catalyst for the current run higher in Tesla stock has been the company’s second quarter delivery numbers, which serve as an approximation for sales.

Investors are bidding up Tesla stock because the Q2 delivery numbers beat Wall Street forecasts. However, analysts had set a very low bar for Tesla given its recent poor financial results.

Make no mistake, the latest delivery numbers from the automaker were still bad. They just weren’t as bad as feared.

Tesla’s latest deliveries totaled 443,956 vehicles in the second quarter, with total production of 410,831 vehicles. Analysts on Wall Street had expected deliveries of 439,000, according to data from FactSet.

Despite beating analyst forecasts, Tesla’s Q2 deliveries were down 4.8% from 466,140 vehicles a year earlier and demonstrated a continued sales decline at the company.

In comparison, rival automaker General Motors (NYSE:GM) reported its best quarterly sales in nearly four years for the second quarter, boosted by a 40% increase in sales of its electric vehicles.

Make-or-Break Quarter

Tesla is scheduled to announce its second-quarter financial results on July 23. The print is shaping up to be a make-or-break moment for the company and its stock.

The previous quarterly results from the company were a complete train wreck and the main reason that Tesla had, until now, been among the worst performing stocks in the benchmark S&P 500 index this year.

For the first quarter, Tesla reported its biggest revenue decline since 2012 and management warned that its “volume growth rate may be notably lower than the growth rate achieved in 2023.”

While the company has announced a host of new initiatives in recent months, ranging from robots to supercomputers, none of the plans seem to have firm timelines or are guaranteed to help the company’s top and bottom lines. They also distract Tesla from its core business of making electric vehicles.

Sell Tesla Stock

Add in the recent drama surrounding Tesla CEO Elon Musk’s exorbitant and unjustified $56 billion pay package and there’s no good reason to take a position in TSLA stock.

The company’s electric vehicle sales continue to decline while competitors such as General Motors surpass them. The upcoming quarter could be an ugly one that ends the recent rally in the company’s shares.

Plans to shift into new ventures look like moon shots at best. For all of these reasons, Tesla stock is not a buy.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Articles You May Like

Robotaxi Delays and Shrinking Market Share: Tesla Stock in Trouble
3 Flying Car Stocks to Buy Now: Q3 Edition
Investor Warning: Trump’s Return May Spell Trouble for Amazon Stock
3 Sustainable Packaging Stocks Wrapping Up Profits
If You Can Only Buy One Machine Learning Stock in July, It Better Be One of These 3 Names