Tesla jumps as Musk's promise of 'more affordable' cars eases growth fears By Reuters

By Aditya Soni and Reshma Rockie George

(Reuters) – Tesla shares rose about 10% on Wednesday after the electric car maker eased some concerns about slowing growth with a prediction that sales would rise this year and plans to launch more affordable models early. of 2025.

Investors had been preparing for the worst after a tumultuous week at Tesla (NASDAQ:) that saw major layoffs, executive departures, price cuts and the postponement of a highly touted meeting with the Indian prime minister.

The new plans also helped Wall Street shrug off the company's weak first-quarter results, including a lower-than-expected profit and the first drop in quarterly revenue in nearly four years.

“The first impression we have is that CEO Elon Musk is appeasing the market by accelerating the launch of new products,” Jefferies analysts led by Philippe Houchois said in a note.

Tesla was on track to add about $50 billion to its market value of about $460 billion. The stock has fallen 42% this year, through the last close, as high borrowing costs have dampened demand for electric vehicles and a price war intensified in China's main market.

Tesla's growth strategy could strengthen support for a May shareholder vote on Musk's $56 billion compensation package, which was overturned by a Delaware court in January.

Some Tesla investors, such as Ross Gerber, president and CEO of Gerber Kawasaki Wealth & Investment Management, had said in recent days that they planned to oppose the package, citing a drop in Tesla's stock price and a compromised board of directors.

'DE-CONTENTED MODEL Y/MODEL 3'

Several analysts took Tesla's comments that its cheapest models would be built using current platforms and production lines as a sign that it had backed away from more ambitious plans for an all-new model that was expected to cost $25,000.

“We view 'more affordable' as potentially dissatisfied versions of the Model Y/Model 3 with improvements in software and ai/hardware capability, but at lower prices,” said Morgan Stanley analyst Adam Jonas.

Musk declined to provide details on the most affordable models and instead dedicated much of the earnings call to Tesla's efforts to diversify its business into artificial intelligence, humanoid robots and operate a fleet of autonomous vehicles, all based in software and hardware products that it has not yet developed. fully developed.

Investors and analysts have long given Tesla a premium valuation for its efforts such as its driver-assist technology.

Tesla stock is trading at 57.38 times its estimated 12-month earnings, a PE ratio that is comfortably higher than Ford's (NYSE ) 7.06 and General Motors' (NYSE ) 4.80.

Tesla shares jumped to about $160 each in early trading, a price at which short sellers have lost $1.62 billion on paper since Tuesday's close, according to data and analytics firm Ortex.

However, short sellers are still making nearly $8 billion in profits this year.

“While details (about the new models) are scarce, this was a smart move on Musk's part as it justifies the negative cash flow and higher capital expenditure,” said Kathleen Brooks, director of research at XTB.

“Unlike many companies that are reducing capital spending in the current environment, Tesla is going against the grain… putting it in a strong position as the electric vehicle market becomes more competitive and sensitivity to prices,” Brooks added.