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Why Tesla Stock Jumped on Wednesday

By Daniel Sparks - Jan 6, 2021 at 1:09PM

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The electric car maker's shares are hitting new all-time highs again.

What happened

Shares of Tesla ( TSLA -5.59% ) surged higher on Wednesday, extending the stock's early momentum in 2021. Shares rose as much as 5.3% but were up 4.8% as of 12:35 p.m. EST.

The stock's gain is likely due to a combination of broader market strength in renewable energy stocks and an upgraded analyst price target for Tesla shares.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

Renewable energy stocks like Tesla are trading higher on Wednesday, likely due to speculation that Democrats have a chance at winning the Senate majority. With the party typically more willing to help subsidize growth in green energy than Republicans, investors may be speculating that a Democrat majority could lead to legislation that benefits Tesla.

In addition, shares are likely trading higher because of Morgan Stanley analyst Adam Jonas' move on Tuesday afternoon to upgrade his 12-month price target for Tesla stock from $540 to $810. The analyst says his bullish view is backed by the company's recent capital raise, strong growth in fourth-quarter deliveries, and a rosier outlook for Tesla's long-term growth potential in vehicle deliveries.

Shares of the growth stock are "richly valued for a reason," the analyst told investors. 

Now what

Tesla now has a market capitalization greater than $700 billion, capturing how heavily the market is betting on the automaker. While the company's valuation doesn't make sense when compared to trailing financials, investors are betting that Tesla's sales can continue growing at high growth rates for years to come. In addition, some investors may be expecting Tesla to eventually generate substantial revenue and profits from the self-driving technology it is working on.

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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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$1,023.99 (-5.59%) $-60.62
Morgan Stanley Stock Quote
Morgan Stanley
$98.41 (-0.46%) $0.45

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