Why Tesla Stock Soared More Than 40% in 2023's Opening Month and Is Still Climbing

What happened

Tesla (TSLA 2.31%) stock gained 40.6% in January, according to data from S&P Global Market Intelligence. The electric vehicle company’s share price gained ground in conjunction with positive momentum for the broader market, better-than-expected fourth-quarter results, and other developments that the market interpreted as bullish indicators for future performance. 

TSLA Chart

TSLA data by YCharts

January was a huge month for Tesla stock. The biggest positive valuation catalyst valuation arrived with the company’s Q4 results, which the company published on Jan. 25. The EV maker posted non-GAAP (adjusted) earnings per share of $1.19 on revenue of $24.32 billion, while the average analyst estimate had called for per-share earnings of $1.13 on sales of $24.16 billion. The top-and-bottom-line beats gave the stock a fresh injection of positive momentum, but there were also other catalysts that shaped performance last month. 

A Tesla Model S.

Image source: Tesla.

So what

Tesla kicked off the new year with a huge announcement. The EV leader revealed on Jan. 13 that it would be cutting global prices on all of its car lines by as much as 20%. The news initially prompted sell-offs for the stock, as investors weighed the negative impacts that this would likely have on the company’s margins. But the market warmed up to the decision as the prospects of increasing unit sales and putting pressure on competitors came more clearly into focus. 

The company followed the news up with the publication of its fourth-quarter earnings release, and the report arrived with plenty for investors to celebrate. Earnings per share were up 40% year over year on a split-adjusted basis, and sales were up 37% compared to the prior-year period.

The fourth quarter saw the company produce 439,000 vehicles and deliver over 405,000. Tesla ended the year with 1.31 million vehicle deliveries and 1.37 million vehicles produced — up 40% and 47% year over year, respectively.

In the company’s Q4 conference call, CEO Elon Musk also expanded on guidance for 1.8 million vehicles produced in 2023 by saying that it’s possible that the company will produce 2 million cars this year if there aren’t any logistical or supply chain disruptions. The market responded very favorably to the results and guidance, and bullish momentum for Tesla stock has continued in February. 

Now what

Tesla stock has continued to gain ground in February’s trading. The company’s share price is up roughly 15.4% in the month so far, as of this writing. But even after the recent rally, Tesla stock still trades down roughly 51% from its high.

The rising interest rate environment has been hard on valuations for many growth stocks, but it looks like pressures on that front are beginning to moderate. At its meeting on Feb. 1, the Federal Reserve announced a 25-basis-point interest rate hike — a welcome reprieve following four 75-basis-point increases and a 50-basis-point increase that had previously been served up by the central-banking authority. The Fed expects to continue raising rates, but it looks like rate hikes are having the desired effect of tamping down inflation.

If macroeconomic conditions stabilize and Tesla continues serving up strong business results, the stock could continue to march higher in 2023.  

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.