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Why Tesla Stock Soared Even Higher This Week

By Daniel Sparks – Nov 5, 2021 at 2:08PM

Key Points

  • Shares are riding higher on a bullish week for the stock market.
  • One analyst said he believes the company's already-impressive gross profit margin can expand even more.
  • Has the stock's gain gone too far?

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The electric car maker's stock is up almost 60% over the last 30 days.

What happened

Shares of electric car maker Tesla (TSLA 4.73%) continued their sharp trend upward this week. The stock rose as much as 11.1% during the week and was up 10.6% as of this writing, according to data from S&P Global Market Intelligence.

The growth stock's gain is likely primarily due to share price momentum, an upbeat week for the overall stock market, and several other news items rated to Tesla specifically.

Vehicle production at a Tesla factory.

Vehicle production at Tesla's factory in California. Image source: The Motley Fool.

So what

Capturing the underlying bullish market momentum this week, the S&P 500 has risen more than 2%. The Nasdaq Composite has climbed nearly 3%.

Also likely playing a role in the stock's gain is its staggering momentum upward in recent weeks. Tesla shares have risen nearly 60% in the last 30 days alone. This week's gain likely reflects a continuation of this momentum.

Also likely helping investor optimism toward the stock this week was an analyst's commentary on the company's profit potential. Bernstein analyst Toni Sacconaghi recently pointed out the company's impressive expansion in its automotive gross margin. He also noted that he believes there are a number of reasons Tesla will see further improvement in the key profitability metric next year. Another potential catalyst for the stock may have been news that Tesla launched a pilot program in the Netherlands to share its Supercharger network with other electric car brands for a fee.

Now what

Tesla stock, of course, can't keep up its upward momentum every week. Indeed, the stock's valuation has already become quite pricy. Moreover, after such impressive gains, it wouldn't be surprising to see the growth stock take a breather. And any pullback with such strong momentum in the rearview mirror could be quite steep.

You've been warned.

Whatever happens to Tesla stock in the near term, investors should stay focused on the company's long-term business potential and their interpretation of the stock's valuation relative to that potential.

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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