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Why Tesla Shares Skyrocketed

By Jeremy Bowman - Updated Nov 17, 2016 at 4:25PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Tesla Motors (NASDAQ: TSLA) were revving up today, gaining as much as 23% as the electric-car maker predicted it would post its first-ever quarterly profit this May.

So what: Tesla said first-quarter sales of the new Model S sedans are coming in better than expected, topping 4,750 units, ahead of guidance at just 4,500. Tesla shares reached a new all-time high on the news as the company also announced that it would no longer produce a cheaper, lower-range version of the Model S due to low demand. CEO Elon Musk also alluded to a big announcement coming tomorrow, saying he would "put my money where my mouth is in a major way." Some speculate that the announcement could be related to quicker repayment of government loans or putting solar panels on cars.

Now what: With a backlog of 15,000 vehicles and its first profit in the pipeline, Tesla may be well on its way to disproving the naysayers. Its high-performance electric cars have elicited glowing reviews, but the stock is still pricey from a valuation perspective. Tesla did not provide more specific guidance so we don't know how much of a profit to expect, but the pieces seem to be falling into place to make this a long-term winner.

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