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Tesla shares recover despite falling market share in electric vehicles

Tesla faces tougher competition than ever, but that has done little to stop the company’s share price from rallying, erasing losses this year and putting to rest the question of whether the company still deserves to be among the “Magnificent Seven” – a term inspired by the movie that describes the tech giants (Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia are the others) that have accounted for the lion’s share of the stock market gains of recent years.

However, when Tesla stock plummeted to $138.80 in April, Tesla barely managed to defend its place on the list of America’s top 10 companies. Experts like CNBC’s Jim Cramer had already declared that the company had vacated its place among the country’s most powerful and fastest-growing companies.

Driven by second-quarter deliveries that beat low expectations, Tesla’s massive rally continued on Wednesday as shares ended the day trading at $263.26, their highest since September. Tesla’s market cap is now approaching $850 billion, making it the eighth-largest U.S. company, but still far behind the $1.3 trillion market cap of Meta, the next smallest member of the Magnificent Seven.

As AssetsChristiaan Hetzner of the New York Times noted earlier this week that while Tesla bulls view the company as an artificial intelligence company, it has yet to prove it can sell cars – an assumption that could be called into question in light of a New York Times report citing Cox Automotive that Tesla no longer controls the majority of the American electric vehicle market.

Seth Goldstein, equity strategist at Morningstar, said Assets that he never believed in focusing on Tesla’s market share in electric vehicles. He noted that given the increasing overall demand for electric vehicles, Tesla’s market share should decline even if the company continues to grow.

“I think the more important number is what their deliveries are and what their share of the overall automotive market is, including internal combustion engines,” Goldstein said.

Tesla deliveries exceed expectations

Earlier this month, Tesla said it delivered nearly 444,000 vehicles in the second quarter, down nearly 5% from a year ago. As Hetzner noted last week, analysts had expected a decline of about 9%.

That number impressed Goldstein, as did the record numbers from Tesla’s energy storage business. The company said it deployed 9.4 gigawatt hours of battery storage capacity, its highest quarterly number ever and more than double the amount reported in the first quarter. Even small changes in expectations for high-growth stocks, Goldstein said, can have a big impact on share prices.

“This shows that Tesla can still grow,” Goldstein said. “It shows that Tesla may have the worst behind them and that they are turning things around.”

Waiting for news on robo-taxis and affordable vehicles

Investors will also be looking forward to August 8, when Tesla is scheduled to unveil its Cybercab, the robo-taxi model that is expected to have no steering wheel or pedals. Goldstein is curious if there is a concrete timeline for the unveiling or if details are few and far between.

In the near future, Goldstein wants to hear more about Tesla’s progress in producing a new, cheaper vehicle when the company holds its next quarterly earnings call on July 23. Musk has said production could begin as early as 2025, which Goldstein said would allow deliveries to ramp up again by 2026.

He believes the market will react positively if this schedule is met.

“If they don’t recommit or give us any updates,” he said, “the stock could falter.”

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