Shares of Tesla are poised to break out as the company benefited from the recent launch of SpaceX rocket.
The transportation company has benefited from several factors including the automaker’s launch of the Model Y and a return to production at its factory in Fremont, California. While the state of California was under quarantine, Tesla had to halt is manufacturing efforts, which put it behind its operational goals. The surge in the stock price follows a secondary offer that was issued earlier in 2020 which allowed the company to raise additional money in the capital markets using its stock.
Secondary Offering
Few companies can come to the capital markets for a secondary offering and see their stock price rise. Generally, this is a sign of weakness, and shares will pull back, especially if the secondary offering price is well below the current market value. Tesla sold 2.65-million shares of its common stock for $767 per share in mid-February. At the time of the announcement, the discount was 4.6% which is tighter than the norm. The company raised about $2 billion from the sale.
Tesla announced that the proceeds of the secondary offering will use to further strengthen its balance sheet, as well as for general corporate purposes. Before the offering hit the market, the company announced that CEO Elon Musk, will buy $10 million in common stock, and Larry Ellison, a member of Tesla’s board of directors, will buy up to $1 million worth of shares.
Tesla Benefits From SpaceX Launch
The share price move to test the all-time highs was partly driven by the fanfare surrounding the successful launch of a rocket into orbit. Space Exploration Technologies Corp. is an American aerospace manufacturer and space transportation services were founded in 2002 by Elon Musk. In late May, SpaceX founded and led by Elon Musk, successfully sent two NASA astronauts on SpaceX’s Falcon 9 rocket to the International Space Station. This was the first time a commercial spacecraft has brought humans to the ISS. It appears that the successful launch gave investors more confidence in Musk’s leadership.
Must have had a checkered past revolving Telsa. In May of 2020, the CEO said that the stock price was too expensive. Elon Musk tweet hit Tesla shares, which fell $60 after the revelation. It closed down more than $80, or 10.3%, on the day. Musk’s commentary about the global COVID pandemic also insight many investors. In May 2020 Mush fumed over government efforts to contain the spread of the coronavirus. During the company’s earnings call with analysts following the Q1 financial results Musk, lashed out at the quarantine orders that have closed Tesla’s California car factory, calling them fascist.
Telsa Continues to be Trusted
What is clear is that many drivers enjoy driving a Telsa and trust it tremendously. Tesla was able to make it into the Top 3 in a list of the Ten Most Trusted Automotive Brands in Australia for 2020. This was up from 7th in 2019’s rankings. The list was created by Roy Morgan’s Annual Risk Report for 2020, an annual survey of more than 7,000 respondents. Tesla displaced Honda out of the third spot in 2020. In January 2020, Model 3 was the most popular electric vehicle in terms of new registrations by a 3-to-1 margin. Australians purchased the Model 3 350 times during the first month of the new year.
The Share Price is Testing All-time Highs
Tesla shares are poised to test all-time highs. The share price has broken out above trend line resistance and has outperformed the broader stock market. After collapsing in March as the broader markets crumbled, the shares of the stock rebounded and has recaptured nearly all of its losses. Target resistance is seen near the all-time highs at $970.
Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). Short term momentum has also turned positive as the fast stochastic generated a crossover buy signal.
The Bottom Line
Despite the US falling into a recession, it appears that Tesla is continuing to gain momentum. The successful launch of the SpaceX rocket into orbit has provided Elon Musk, the CEO of Tesla, with some well-needed investor confidence. The company has restarted its manufacturing in California after a quarantine that stopped production. The share price is now testing its all-time highs, after recovering nearly all of the losses faced in March as COVID-19 spread across the United States. The outlook for Telsa appears to be positive.