What happened
Shares of Tesla (NASDAQ:TSLA) rose sharply on Monday, climbing nearly 3%. As of 10:20 a.m. EDT, shares were up 2.2%.
The gain for the electric vehicle maker's stock was likely driven by an analyst's move to increase his price target for shares, as well as a somewhat bullish day for many growth stocks like Tesla.
So what
Jefferies analyst Philippe Houchois thinks Tesla will see improved profit margins next year. He believes this will be driven by improved manufacturing and a higher-margin product mix, with a larger proportion of sales coming from the Model Y SUV and its high-priced Model S sedan.
Specifically, the analyst forecasts Tesla's earnings before interest and taxes to move toward 17% of sales over the 2021 to 2022 period. He increased his 12-month price target for the stock from $700 to $850 and upgraded his rating from hold to buy.
Also likely helping Tesla stock on Monday was a generally bullish day for many growth stocks, with a lot of them rising several percentage points or more.
Now what
Tesla has seen material improvement in many key profitability metrics recently. The company's operating margin in the second quarter was 11%, up from 5.4% in the year-ago quarter and 5.7% in the first quarter of 2021. Its automotive gross margin was 28.4%, up from 25.4% in the year-ago period and 26.5% in the first quarter of 2021.
While there's bound to be some quarter-to-quarter volatility in Tesla's profit margins, investors largely expect them to improve...
Read Full Story: https://www.fool.com/investing/2021/08/09/why-tesla-stock-jumped-on-monday/
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