It’s Wednesday, and Tesla ( TSLA 1.27% ) stock is moving higher in late morning trading — up 4.5% as of 11:30 a.m. ET.
The question is… why?
As Reuters reported late last night, the sudden surge in COVID-19 infections in China has prompted that country’s government to impose quarantines in Shanghai, the location of Tesla’s Chinese Megafactory.
Acceding to the restrictions, Tesla announced it is shutting down production for at least two days — and the closure could last as long as two weeks if Shanghai officials need longer than that to conduct their contact tracing. That sounds like bad news for Tesla’s production numbers. But business magazine Barron’s argues today that “there is good news too” that is offsetting the bad, and helping to keep Tesla’s stock price moving higher.
There’s just one problem with that: I don’t actually see any good news for Tesla today.
To the contrary, on top of the shutdown, today we’re hearing:
- Higher raw material costs are necessitating price increases on Tesla vehicles, which could dampen consumer demand.
- Tesla just fired an employee for posting on YouTube a video of his Tesla running on Full Self Driving Beta — and getting into an accident.
- S&P Global just warned that the conflict in Ukraine could depress global car sales by as many as 1 million units this year, while continuing supply chain constraints could subtract a further 1.6 million units from global automobile production.
For that matter, even Barron’s seems to contradict itself on the good news front, highlighting falling oil prices that could lower the cost of gasoline, and remove an incentive pushing car buyers to switch to electric cars.
Granted, Barron’s also highlights recent moves by the Chinese government to shore up its stock market, and the potential for peace talks to end the Ukrainian conflict at some point in the future, calling those two news items good news. Combined with falling oil prices, these factors could explain why investors in general are feeling a bit more optimistic today than they were last week, for example.
None of that sounds like “good news too” for Tesla in particular, however. If investors were thinking rationally today, I kind of suspect that Tesla stock would be going down, not up.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.