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Tesla stock pops as worst case scenario fears subside

Tesla CEO Elon Musk sounded sleepy on the EV maker's earnings call late Wednesday. That's not surprising given the time needed to try to reduce debt at Twitter, appear in court, study rocket designs, and stay up late the day before the call with the Tesla AI team.

Musk did his best to sound enthusiastic about Tesla's business as he warned of a "severe" recession this year — doubling down on his recent downbeat economic rhetoric — before announcing a delay in the timeline of Cybertruck production to the summer, with "volume production" commencing in 2024. The company's volume growth guidance for 2023 of 38% was also below a long-term target of 50%.

And yet, Tesla stock (TSLA) rose as the earnings call went along. At the open Thursday, the stock was up more than 10%. The ticker is trending on the Yahoo Finance Platform.

"Demand story and commentary from Musk strong on Tesla’s earnings call," Wedbush analyst and Tesla commentator Dan Ives said on Twitter. "Volumes look strong out of the gate in January post price cuts and China a key dynamic. In our opinion this was a bullish call and realistic delivery numbers set for 2023. Street should digest this well."

So what happened here, exactly? It appears Musk and his team did just enough in the mind of many investors to remove the worst-case scenario for the stock in the near-term. That worse-case scenario, pros say, would be a re-test of the 52-week low around $101.

In essence, investors are betting that Tesla's stock bottomed weeks ago.

SAN FRANCISCO, CALIFORNIA - JANUARY 24: Tesla CEO Elon Musk leaves the Phillip Burton Federal Building on January 24, 2023 in San Francisco, California. Musk testified at a trial regarding a lawsuit that has investors suing Tesla and Musk over his August 2018 tweets saying he was taking Tesla private with funding that he had secured. The tweet was found to be false and cost shareholders billions of dollars when Tesla's stock price began to fluctuate wildly allegedly based on the tweet. (Photo by Justin Sullivan/Getty Images)
Tesla CEO Elon Musk leaves the Phillip Burton Federal Building on January 24, 2023 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

"Investors now seem willing to underwrite ~$100 hard downside," EvercoreISI analyst Chris McNally wrote in a note to clients."Elon was optimistic on the call."

Here is what Yahoo Finance heard on the earnings call that may be fueling Tesla's stock:

  • 2023 Cybertruck production confirmed (pushed out timeline being ignored).

  • CFO Zach Kirkhorn pushed back on the notion recent price cuts will send Tesla's gross margin below the key 20% level in 2023.

  • $22 billion plus in cash on the balance is a good place for Tesla to be in the current economic climate.

  • Demand signals appear solid following recent price cuts.

  • New model said to be under development, with details potentially coming at a March investor day.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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