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Why Tesla Stock Jumped on Wednesday

By Daniel Sparks – Nov 3, 2021 at 6:21PM

Key Points

  • Shares of Tesla have risen nearly 60% over the past 30 days.
  • The electric-car maker's deliveries are soaring.
  • A price-to-earnings ratio of nearly 400 means the stock is priced for spectacular growth over the next 10 years.

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The electric-car maker's stock caught a wave during an upbeat day in the overall market.

What happened

Shares of Tesla (TSLA 11.00%) jumped on Wednesday, climbing 3.6% by the time the market closed. The move extends the stock's recent bullish momentum.

While there was no specific reason for the growth stock's gain on Wednesday, shares have been generally trending upward lately. This could be a continuation of that trend. In addition, it was an upbeat day for the overall market, with the S&P 500 and the Nasdaq climbing about 0.7% and 1%, respectively.

Tesla vehicles outside of the company's factory in California.

Tesla vehicles. Image source: The Motley Fool.

So what

Highlighting Tesla stock's momentum recently, shares have surged 71% over the past three months and 57% in the last 30 days alone. With so much momentum, it's not surprising to see shares trading higher again. Of course, investors shouldn't count on this near-term momentum to continue. Any pullback after such a staggering run-up could be sharp.

Tesla's third-quarter momentum has had many analysts recalibrating their models for the stock higher. The company has made significant progress in manufacturing, sales, and profitability -- even during a challenging operating environment. Third-quarter vehicle deliveries increased 73% year over year to more than 241,000, and management said it was able to achieve an annualized production run rate of more than 1 million cars by the end of the quarter.

Now what

The downside to a soaring stock price, of course, is that expectations are increasing. This means investors expect Tesla's impressive business momentum to persist. Looking ahead, investors will want to look for the company to continue growing deliveries and profitability.

Fortunately, management seems to think Tesla is just getting started. In its third-quarter shareholder update, the company guided for 50% annual growth in deliveries over "a multi-year horizon."

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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