On January 29, Tesla's shares surged approximately 3% before markets opened on Thursday. This increase was driven by the announcements of upcoming budget-friendly electric vehicles and paid autonomous driving services by the company. Despite falling short of Wall Street's expectations in the fourth quarter, these plans boosted investor confidence.
Facing a decline in annual deliveries for the first time last year, Tesla has faced mounting pressure to reveal new autonomous vehicles and software. CEO Elon Musk has emphasized that these initiatives will enhance future profits.
Agile competitors like China's BYD, BMW, and Volkswagen from Europe have also introduced more affordable models to seize a larger market share.
Barclays analysts remarked, "Who cares about estimates when Tesla is providing you supercharged narrative command."
The surge in Tesla's market value coincided with the election of U.S. President Donald Trump, a strong supporter of CEO Elon Musk. Investors are optimistic that the new administration will relax regulations related to Tesla's self-driving technology development.
Matt Britzman, a senior equity analyst at Hargreaves Lansdown, noted, "Tesla investors are excited about the Full Self-Driving technology and the upcoming affordable model, which are viewed as key drivers for Tesla's future growth."
Tesla's highly profitable full self-driving (FSD) software is crucial for justifying its high valuation, with a focus on software-driven profits and autonomy, according to Britzman.
CEO Elon Musk previously projected a 20% to 30% sales growth by 2025, a forecast omitted from the latest results, drawing disappointment from some analysts.
Morgan Stanley characterized Tesla's fourth-quarter results as indicative of its transformation from an automotive-centric company to a diversified player in AI and robotics.
Tesla currently carries a 12-month forward price-to-earnings ratio of about 118.39, significantly higher than Ford's 6.07 and GM's 4.48.