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Why Tesla Stock Jumped on Tuesday

By Daniel Sparks - Jun 4, 2019 at 1:41PM

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Some investors may believe the electric-car maker's stock has been oversold.

What happened

Shares of electric-car company Tesla ( TSLA 0.68% ) rose on Tuesday, gaining as much as 7%. As of 1 p.m. EDT, the stock was up 6%.

The stock's gain is likely fueled by a number of factors, including analyst commentary, gains for growth stocks on Tuesday, and more.

Tesla's Model S, 3, X, and Y

Image source: Tesla.

So what

Morgan Stanley analyst Adam Jonas reiterated an equal-weight rating and a $230 price target on Tuesday. The 12-month price target is notably more than 20% higher where shares are trading today, signaling meaningful upside for the stock. 

Tesla's gain on Tuesday also follows a sharp year-to-date decline for the stock. Shares are down 43% so far -- even after today's gain. Some investors, therefore, may believe shares have been oversold.

Finally, it's an overall positive day for growth stocks, as many of them recovered by a few percentage points on Tuesday after being beat down amid trade war concerns. Tesla's rise today could be partly attributable to this market bullishness.

Now what

The near-term concern for Tesla investors to keep an eye on will be demand for the company's vehicles. The electric-car maker forecast vehicle sales to rise 45% to 65% year over year in 2019. While growing Model 3 production suggests supply will be sufficient enough for Tesla to meet this target, it's unclear whether demand will be robust enough.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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