Defying today's market downturn, shares of electric vehicle (EV) leader Tesla (TSLA -1.62%) are revving up in Friday afternoon trading, gaining a solid 3.6% as of 12:20 p.m. ET. And for a change, it's some good news out of China that is driving Tesla higher.
Specifically, Reuters reports that in the month of June, Tesla sold 78,906 EVs manufactured in China.
That's more than twice the 32,165 vehicles that Tesla was able to crank out in China in May. And it was a huge turnaround from April, when Tesla's Shanghai Gigafactory was mostly shuttered during a crackdown on the spread of coronavirus, and produced barely 1,500 automobiles. Indeed, according to Reuters, the 78,906 cars produced in June set a new record for Tesla's Chinese plant.
And to put the icing on the cake, Reuters confirms that Tesla's Model Y electric crossover was "the best-selling model among all passenger vehicles" in China for the first time ever in June.
What does this mean for investors? It does appear to verify the theory that the COVID slowdown in China over the past two months has created significant pent-up demand for the company's products. Investors who were spooked earlier this week by Tesla missing its delivery target for the second quarter of 2022 appear to have overreacted, and as the June numbers begin bearing out the pent-up demand, Tesla shares are already beginning to recover from that sell-off.
The other good news is that after factoring in Tesla's deliveries miss, analysts have lowered their expectations for Tesla's full-year profits again, to about $10.36 per share, according to S&P Global Market Intelligence. This makes it even easier for Tesla's sales revival to deliver an earnings beat later this year.
Things are looking up for Tesla stock today. At 72 times current-year earnings, it remains far from cheap. But it has momentum on its side now, and investors shouldn't discount the potential for further good news to drive this stock even higher.