Why Tesla Motors Inc. Stock Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Tesla Motors (NASDAQ: TSLA  ) were revving higher today, gaining as much as 15% after its Model S sedan got an important stamp of approval in Germany.

So what: Germany's Federal Motor Transport Authority said that it had concluded a review of Model S fires, and found "no manufacturer-related defects." The decision comes after three fires had occurred with the electric cars in a span of six weeks, and as it is under investigation by the U.S. National Highway Traffic Safety Administration, or NHTSA. A finding of a defect could have led to a recall for the high-priced sedan. Tesla shares had been a tailspin lately on concerns about valuation and the recent fires, following a rocket-like gain earlier in the year, so today's news seems to bode well for concerns about the fires.

Now what: Clearance from the NHTSA could lift Tesla's stock further, and several analysts reiterated their bullishness in the stock following the news out of Germany, arguing that the fires should not cause material damage to the company. Two of the fires had been caused by debris, and one by a crash, and CEO Elon Musk responded to the criticism, saying that gas-powered vehicles are just as likely to experience fires. With its sky-high valuation, Tesla still looks too pricey for me, but it seems like today's report should help put the battery concerns to rest.

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Read/Post Comments (10) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On December 03, 2013, at 3:58 PM, rhealth wrote:

    Well yeah, but that's not why it jumped 16%!!

    Thats just short covering.

    Confounded again!!

  • Report this Comment On December 03, 2013, at 4:10 PM, chinesebuffett wrote:

    I'm sure it was a real in depth analysis of the Model S. Longs drool over manufactured "good" news.

  • Report this Comment On December 03, 2013, at 6:31 PM, jimillo wrote:

    It also didn't hurt that today the Ohio legislature killed an amendment that would ban Tesla from opening stores in Ohio (the 7th most populous state in the U.S.). Add in a successful Spacex commercial satellite launch (a first), and Elon Musk definitely had a very, very good day today.

  • Report this Comment On December 04, 2013, at 8:18 AM, Jamie wrote:

    What about the battery supply agreement with Panasonic that was announced a couple of days ago? Doesn't it increase the possibility that Tesla can improve output and meet the currently un-met demand?

  • Report this Comment On December 04, 2013, at 9:59 AM, Oseo wrote:

    It's huge that the German NHTSA, (the makers of the highest quality roads/ highest performance gasoline cars in the world), has concluded, in its very serious and meticulous investigation, that there is no defect whatsoever in the model S. They don't play games on the autobahn: cars go 200mph there. The USA's NHTSA needs to stop playing games and get set of... to recognize that there is absolutely nothing wrong with the model S - regardless of how much pressure they have from some other car manufacturers, politicians, and banks to find "spmething wrong" with a Tesla. Tesla achieved the NHTSA's own highest safety score possible, the highest score in history! First of all, what jurisdiction, investigative authority, control of road regulations/quality/speed limits does the NHTSA have in Mexico? Absolutely none. That guy went through a cement wall and hit a tree at 100mph. Ok, so that leaves two high speed accident against large chunks of metal (you try driving against a three-prong trailer hitch at 80 mph). You'll be lucky to make it out alive. The eyes of the world are on the USA's NHTSA. Their reputation is at stake - not Tesla's. It is clear, to even a five year old, that Tesla is being subjected to blatant curruption.

  • Report this Comment On December 04, 2013, at 10:18 AM, Oseo wrote:

    Anyone who disagrees with Tesla's business model should do the following:

    1- Buy a regular car at a dealer, and pay 15% over the manufacturer price, and haggle for hours in the "let me talk to my manager" hell on earth. Note: they could never sell Teslas, because they wouldn't be able to sell the rest of the cars on their lot (because Tesla is that much better).

    2- Go to Tesla, pay the manufacturer price at a beautiful department store at the mall, and design your car at their apple computers.

    Any questions?

  • Report this Comment On December 04, 2013, at 11:50 AM, cjaeger wrote:

    While the following may be true within the article, "CEO Elon Musk responded to the criticism, saying that gas-powered vehicles are just as likely to experience fires"

    I believe his talking points expressed at http://www.teslamotors.com/blog/model-s-fire are indicating gas-powered vehicles are worse than Tesla.

    "1 [gas-powered] vehicle fire for every 20 million miles driven, compared to 1 fire in over 100 million miles for Tesla"

  • Report this Comment On December 04, 2013, at 12:09 PM, BloviationNation wrote:

    I suspect the NADA and Big Oil are in bed on this anti-Tesla drive. I've noticed however, that the NADA is trying its best to keep its efforts to ban Tesla's ability to sell direct to the public, out of the news. I don't think enough Americans realize that they are being forced to purchase their new cars through a dealership at an average 6-9% markup. The reason that the NADA and their network of thieving dealerships can exist is because of archaic state franchise laws. Laws that should have been abolished 70 years ago. The NADA needs states to keep these antiquated laws in place otherwise they lose their reason for existing. Thats why the NADA has created one of the most powerful lobbies in DC. They routinely grease politicians by contributing to there campaigns or other coffers. There is NO REASON that you should be required to purchase your new car through a dealer. Support Elon (even if you don't like electric vehicles), and he just might win back your right to buy straight from the manufacturer.

  • Report this Comment On December 04, 2013, at 10:42 PM, AGeneYoung wrote:

    Motley, you shouldn't be such a hindrance to people that want to express themselves. For what ever reason you do, you do free thought a hell of a disservice.

    I don't think my comments should be delayed by a fri88en' nanosecond much less 15 minutes. Call me crazy but that's just what I think.

    Now here are my thoughts.

    For every fiscal action there is an opposite and equal (at times more) fiscal reaction.

    Like it or not; that's how it is.

    This explains TSLA (or any) volatility. Wanna bet? OK, just do it. My bets are already on the table.

    Get them if you can. :)

  • Report this Comment On December 04, 2013, at 10:51 PM, AGeneYoung wrote:

    'I suspect the NADA and Big Oil are in bed on this anti-Tesla drive.'

    I am so ashamed however I'm going to come clean. I have been in bed with Big Oil for a very long time. I don't know if its been their big deep pockets or their naturally endowed very large (I can't really mention this) thing that has done the trick.

    Whatever. The trick has been done. I'm in bed with them and I seriously doubt you can get me in your bed.

    I'm a whore. Give me a try.

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