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Stock Market News: Why Tesla and Facebook Are Soaring

By Dan Caplinger – Apr 30, 2020 at 11:15AM

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The overall market took a hit on economic fears, but these two stocks bucked the downtrend.

Thursday morning brought an end to a streak of rising stock market days, as investors seemed perturbed by continued economic impacts from the coronavirus pandemic. First-time claims for unemployment benefits came in at 3.8 million for the most recent week, bringing the total number of claims in just six weeks to about 30 million. The flood of people seeking benefits is so large that states are struggling to handle them, especially with the agencies responsible for handling claims facing their own workforce reductions. As of 10:30 a.m. EDT today, the Dow Jones Industrial Average (^DJI -0.43%) was down 155 points to 24,479, while the S&P 500 (^GSPC -0.21%) lost 13 points to 2,927.

However, the Nasdaq Composite (^IXIC 0.25%) managed to claw back from its early losses to inch higher by 5 points to 8,920. Helping to lead the charge for that index were Tesla (TSLA 2.51%) and Facebook (META -1.45%), each of which gave their latest results and shed some light on the factors affecting various parts of the U.S. economy.

A surprise profit for Tesla

Tesla saw its stock jump 6% after releasing its first-quarter financial results late Wednesday. The electric vehicle maker delighted shareholders by posting an unexpected profit, and the company seems confident in its ability to overcome the challenges that the pandemic has brought on.

Tesla saw revenue for the first quarter jump 32% to nearly $6 billion, benefiting from record levels of vehicle production and deliveries to customers. That's especially remarkable given the fact that the first quarter of the year is typically a slow period for Tesla. Moreover, the automaker had positive earnings even without adjusting from generally accepted accounting principles, making it three quarters in a row that Tesla has made money by that measure.

The car company has seen some other encouraging signs. Margin figures are improving in large part due to the opening of its factory in Shanghai, and Tesla managed to achieve positive gross margin for its new Model Y vehicle in its first quarter of deliveries.

Tesla CEO Elon Musk where a black suit on stage with a microphone in front of a Tesla banner.

Tesla CEO Elon Musk. Image source: Tesla.

In typical fashion, CEO Elon Musk overshadowed his company's strong performance with controversial comments, this time related to his critical views on the lockdowns that have idled production at Tesla's California facilities. Nevertheless, investors have to be pleased with the company's progress even through tough times.

Putting on a pretty face

Elsewhere, Facebook also saw its stock rise 6%. The social media company's earnings results confirmed the high expectations that investors had coming into the report, especially in light of signs from other companies that ad revenue hadn't seen the declines that some had feared.

Facebook saw its revenue climb 18% year over year, with advertising revenue in particular seeing a 17% rise. Clamping down on expenses helped the company boost its operating income by 78%, and net income more than doubled from year-ago levels.

Growth in user counts continued. Daily active users jumped 11% to 1.73 billion, while monthly active users hit 2.6 billion, climbing 10% over the past 12 months. More people are using Facebook during stay-at-home periods to stay connected to others, and while the company warned that those trends could reverse themselves once conditions return to normal, it's optimistic about its long-term future.

Facebook did note that ad revenue trends fell sharply in the last three weeks of the first quarter. Yet ad sales were flat in the first three weeks of April compared with year-ago levels, and that gave hope that the hit to the company would be less severe than feared. If ads come back, then Facebook could continue to see share-price gains well into the future.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Tesla. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$134.40 (-1.45%) $-1.97
Tesla, Inc. Stock Quote
Tesla, Inc.
$282.94 (2.51%) $6.93
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,134.99 (-0.43%) $-125.82
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,647.29 (-0.21%) $-7.75
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$10,829.50 (0.25%) $26.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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