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Why Tesla Stock Jumped on Thursday

By Daniel Sparks – Oct 28, 2021 at 11:55AM

Key Points

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The electric-car maker's shares are now up a total of 38% in October alone.

What happened

Shares of Tesla (TSLA 10.97%) jumped on Thursday, rising more than 3% as of 11 a.m. EDT. The stock's bump higher follows an analyst's move this week to increase its 12-month price target for the electric-vehicle (EV) maker's shares to $1,300. 

The growth stock's gain on Thursday builds on staggering momentum over the last month. Month to date, the stock is up a whopping 38% as investors digest the company's strong third-quarter earnings report.

A chart showing a stock price rising.

Image source: Getty Images.

So what

Piper Sandler analyst Alexander Potter reiterated an overweight rating for Tesla stock and set a price target of $1,300 on Thursday, citing the fact that the competition's attempts to gain momentum in the budding EV market are largely falling flat. In addition, he praised Tesla's warranty performance, implying that the quality of the automaker's vehicles is increasing.

An upbeat day for the overall market likely is also helping Tesla stock today. As of this writing, the S&P 500 was up 0.8%.

Now what

Tesla's sky-high valuation, which gives the stock a price-to-earnings ratio of about 350, means the EV maker will have to follow through with strong performance in the final quarter of the year and going into 2022.

Management has guided for deliveries to rise more than 50% this year, but this view is likely considered conservative by many investors. Growth around 60% (or even higher) is more likely based on the company's recent vehicle production rates and quarterly deliveries.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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