Tesla's Stock Surprises Despite Poor Car Sales

The electric vehicle manufacturer reported disappointing fourth-quarter delivery numbers on Thursday, exceeding expectations by only 3%. However, the company's stock surged 63% in 2024 despite its worst-year-on-record auto business sales.

As the industry-wide slump in EV sales continues, Tesla's deliveries for the full year dropped to 1.79 million vehicles, a decline from last year's 1.81 million and marking the first annual drop in sales history. But what sets Tesla apart is its staggering valuation – now worth over $53% more than it was just a year ago.

Despite this, many analysts are concerned about the company's stock price. With shares trading at nearly 117 times projected earnings over the next four quarters, they represent a significant premium to AI champion Nvidia and other tech giants valued over $1 trillion. Wall Street expects only half of the analysts covering Tesla rate the stock as a sell or hold.

Analysts warn that Tesla faces a tough road ahead until its artificial intelligence applications gain real traction, particularly with regards to its ambitious robotaxi business. Truist analyst William Stein praised Tesla's latest full self-driving software, but noted "imperfections remain obvious and prevent us from recommending its use."

The recent spike in stock price is largely attributed to the company's CEO Elon Musk's relentless promotion of AI as a key growth driver. This narrative helped propel shares up after the November US election, when Mr. Musk enthusiastically supported Donald Trump.

As Tesla continues to ride high on its hype and momentum, investors will need to look beyond the auto business for validation of its valuation. But until then, the company's journey forward remains uncertain, with some warning that it may be due for a correction.