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WILL THE “EXPENSIVE” PROMISES COME TRUE?

October 28, 2024by toleg.work
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 The past week can certainly be called “Tesla Week,” and its adherents were fully rewarded for their loyalty to the gods of innovation and their prophet on earth, Elon Musk. Tesla Week: the company’s shares rose 22% after the announcement of quarterly results, which allowed Tesla to re-enter the top ten most expensive companies in the world. Revenues fell just short of the forecast, but profits and gross margins increased. The main catalyst was Elon Musk, who promised to release a cheap model in 2025, which caused euphoria in the market. This is a quick review from Ivan Kompan, Edinburgh Business School analyst.

Today, Tesla shares are much more expensive than the companies of the Magnificent Seven. The reasons for this value can be different: political (Musk supports Trump), economic (the impact of a cheap model and Robotaxi on profits), or psychological (Musk is a sales genius whose faith in the company is unshakable). But will these promises be fulfilled?

Musk promised a cheap model and a Robotaxi back in 2020, but none of the projects have been realized yet. The first Robotaxi appeared only two weeks ago, but as an exhibition model. The main problem for self-driving taxis will be obtaining licenses, as the technology cannot yet be considered completely reliable. Model 2 and Roadster remain in the plans, but their implementation will require significant costs, which may reduce the profitability to which the market has reacted so enthusiastically. In addition, it is not certain that the “cheap” model will be really affordable.

In general, this week passed without any significant shocks. US government bond yields remain high, which is not conducive to stock market growth. Stock prices are high, and it will take a lot of effort to push them even higher. The mood for interest rate cuts is changing, and the good state of the US economy is not the best incentive for the Fed. The probability that one of the two Fed meetings by the end of the year will be held without a rate cut is 28%. This probability may increase if the labor market report to be released next week is positive. Political risks ahead of the election, which is only 10 days away, are also significant. It may be better to wait.

*And finally, we would like to remind you that the information you have just listened to is not an investment advisory. Remember – investments in the stock market are always tied up with financial risks. So be careful and cautious.

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