Tesla shares hit a record high as Elon Musk defies sceptics

Automotive and energy company Tesla Inc beat Wall Street estimates for annual vehicle deliveries and met the low end of its own target, sending its shares to a record high – a vindication for Chief Executive Elon Musk after a few turbulent years.

Boosted by demand for its mass-produced Model 3 sedans as overseas sales pick up, Tesla on Friday said it delivered 112,000 vehicles in the fourth quarter of 2019, including 92,550 Model 3s and 19,450 Model S and Model X SUVs, which was above expectations of 104,960 vehicles, according to International Brokers Estimate System data from Refinitiv.

The Silicon Valley carmaker delivered approximately 367,500 vehicles during the year 2019, just meeting the low end of its target to deliver 360,000 to 400,000 vehicles in 2019.

Tesla shares were up as much as 5.5 percent at $454, touching a record high.

The stock has had a strong run in recent months after posting a rare profit in the latest quarter and after news of a China ramp-up. With a market valuation of more than $80bn, Tesla is far outstripping the valuations of traditional carmakers General Motors Co and Ford Motor Co.

The delivery results defy sceptics of Musk, whose mercurial behaviour over the last two years came under close scrutiny from federal regulators and shareholders of Tesla.

Musk, who has more than 30 million Twitter followers, has fired off tweets that resulted in an investigation by the United States Securities and Exchange Commission (SEC) and a defamation trial against him.

The Tesla CEO settled the SEC complaint for $20m in 2018, and a Los Angeles jury cleared Musk in the defamation case in December.

“Elon has Tesla executing right on track,” said Roth Capital Partners analyst Craig Irwin.

China ramp-up

Tesla also provided an update on its Shanghai factory, which has started churning out Model 3 cars. It said the plant demonstrated a production run-rate capability of more than 3,000 units per week.

The run-rate shows that the factory appears to be ramping up faster than expected, Baird equity research analyst Ben Kallo said. “Shanghai deliveries should be the next catalyst to drive volume growth.”

The $2bn factory, Tesla’s first car manufacturing site outside the US, is the centrepiece of its ambitions to boost sales in the world’s biggest auto market and avoid higher import tariffs imposed on US-made cars.

A company representative on Thursday said that Tesla will deliver its first China-made Model 3 sedans to the public on January 7.

The Model 3 is Tesla’s most affordable car, with lower-range versions available starting at $35,000.

Analysts in the past have questioned how rapidly Tesla’s vehicle sales will grow as government subsidies for electric vehicle purchases dwindle in the US, China and other markets. Some analysts consider those subsidies the biggest driver for Tesla purchases.

Traditional automakers largely relying on fuel-powered vehicles on Friday reported a decline in fourth-quarter US sales and saw their shares tumble as a widening conflict with Iran pushed oil prices more than $2 a barrel on Friday.

Fiat Chrysler Automobiles NV on Friday said it saw a two percent fall in US auto sales, while GM reported its fourth-quarter US deliveries were down more than six percent.

“The recently escalating geopolitical uncertainties driving oil prices higher are likely to create a tailwind for TSLA shares,” Canaccord Genuity analyst Jed Dorsheimer said.