What happened
Shares of Tesla (TSLA -3.97%) jumped on Tuesday morning, climbing as much as 5.2%. As of 10:59 a.m. ET today, the stock was still up 4.4%.
The catalysts that sent the electric vehicle (EV) maker higher were a boost to its credit rating and evidence of a booming business in one of its largest markets.
So what
Moody's Investors Service gave the stock a boost after the market closed on Monday, lifting its credit rating from junk status. It upgraded Tesla's debt to Baa3, which is the lowest level of investment-grade debt.
"The rating action reflects Moody's expectation that Tesla will remain one of the foremost manufacturers of battery electric vehicles with an expanding global presence and very high profitability," the investment bank said in a statement. This follows an upgrade by S&P Global in October. An improved credit rating will allow Tesla to raise capital for big projects at more competitive rates.
In another positive development for investors, reports suggest Tesla's sales in China continue to grow at a robust pace. Insurance registrations -- which are used to track vehicle sales in the country -- grew for the fourth consecutive week, increasing to 18,712 for the week ending March 19, up 10% week over week. The numbers are even more impressive compared to a month ago -- up 216%, as early February sales were dampened by the celebration of Lunar New Year in China -- yet still climbed 32% year over year.
Now what
The megatrend toward the adoption of EVs show no signs of slowing, despite the economic uncertainty that continues to unfold. Revenue from the sale of EVs worldwide is expected to climb to nearly $460 billion in 2023, rising to $858 billion by 2027, a compound annual rate of 17%.
Furthermore, chief financial officer Zach Kirkhorn has said the company plans to cut its EV production costs by half in the coming years, which will no doubt boost its bottom line.
As the undisputed leader in the industry, the company is well positioned to benefit from this secular trend. For this and many other reasons, Tesla stock is a buy.