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Tesla stock extends gains to 12% as Bank of America upgrades to Buy

Published 04/24/2024, 06:24 AM
Updated 04/24/2024, 06:25 AM
© Reuters

Tesla (NASDAQ:TSLA) stock surged by as much as 11.7% in premarket New York trading Wednesday after the electric vehicle (EV) maker reported earnings for the first quarter, which prompted Bank of America to raise its rating on shares to Buy.

The EV maker's financial results showed revenues dropping to $21.30 billion from $23.33 billion a year earlier, missing the projected $22.15 billion. 

The company's net income also took a significant hit, plunging 55% to $1.13 billion, or 34 cents per share, compared to $2.51 billion, or 73 cents a share, in the same period last year. 

Positive earnings call updates

Although Tesla experienced its largest quarterly revenue decline since 2012, reporting a 9% drop for the first quarter, investors were mostly focused on the earnings call updates. 

CEO Elon Musk announced potential earlier starts for the production of new, more affordable EV models. Initially expected in the latter half of 2025, production could now begin as early as late 2024 or early 2025, he said.

Musk also highlighted on an investor call that Tesla is advancing its artificial intelligence capabilities and is negotiating with a major automaker to license its Full Self-Driving (FSD) technology. 

Tesla maintained a cautious outlook for 2024, anticipating a slowdown in volume growth compared to 2023.

Before the post-earnings jump, Tesla's stock had fallen over 40% this year, driven by concerns over declining deliveries, increasing competition, particularly in China, and the impact of ongoing price reductions. 

This trend was underscored by an 8.5% decrease in vehicle deliveries reported earlier in the quarter.

BofA upgrades Tesla stock

In the aftermath of the Q1 earnings report and earnings call, BofA analysts raised the rating on Tesla stock to Buy from Neutral, citing wind up of positive catalysts.

He noted better-than-feared results, in addition to management commentary that “addressed key concerns heading into the quarter and revitalized the growth narrative.”

The analysts highlighted positive catalysts that are building through the rest of the year, namely new model launches coming sooner than expected, the Robotaxi event on August 8th, cost savings amid recent reports about job cuts, as well as potential licensing of FSD.

BofA maintained its $220 per share price target, which suggested an upside of more than 50% relative to yesterday’s closing price.

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