Why Tesla shares surged 35% in September

There’s never a dull moment with Tesla (NASDAQ:TSLA) shares. And while that isn’t always a good thing, there’s no arguing with the fact the stock was a terrific asset for investors in September.

The share price climbed 34% last month and the reasons are interesting to say the least. But the big issue for investors is where the company goes from here.

Buying

The straightforward reason any stock goes up is that demand from buyers is outstripping supply from sellers. But there’s been an interesting dynamic with Tesla in the last few weeks.

When company insiders buy shares in a business, it’s often taken by the stock market as a positive sign. At the very least, it means they’re willing to stake their own finances on the firm’s future.

Given this, news of Elon Musk buying $1bn in Tesla shares last month naturally caused the stock to rise. The CEO’s wealth has been tied to the stock for some time, but it’s still a big statement.

Analysts have also noticed unusually bullish activity in the options market. Specifically, this has involved high numbers of call options expiring towards the end of September.

Call options give investors the right to buy a certain stock at a specified price before a set date. And people who sell options usually have to buy the underlying asset to hedge their risk.

That means increased call option buying can lead to higher stock buying. And some analysts have suggested that this has been pushing the Tesla price higher in the last month.

Selling

There’s another – more fundamental – reason Tesla shares surged in September. The firm is set to report its Q3 deliveries this week and the early signs are more than slightly positive. 

In China, Q3 insurance registrations for Teslas are reportedly around 9% below the previous year. But investors are focused on the fact this represents a 27% increase on Q2’s numbers.

Something similar seems to be the case in Europe, where analysts are expecting Q3 deliveries to rebound after a couple of difficult quarters. But the real focus is on the US.

Analysts have been expecting a rush in demand from buyers before the end of the $7,500 US federal EV tax credit. And some are even forecasting record sales. 

If that happens, both the firm’s delivery report and its earnings report – due 22 October – should be strong. That’s another reason the stock has been rising. 

Unlike the insider buying and call volume activity, this really does have something to do with the underlying business. But it’s also a very short-term consideration.

Foolish takeaway

Tesla is one of the most innovative companies in the world. And initiatives like robotaxis and humanoid robots are reasons to be interested in the stock from a long-term perspective.

If the firm can execute on these initiatives, the results could be spectacular. But they’re not the only reason why the share price has been climbing over the last month.

Unusual buying activity and a one-off sales deadline are enough to put me off Tesla shares right now. I’ll be keeping an eye open going forward, but I’m looking elsewhere for the time being.

The post Why Tesla shares surged 35% in September appeared first on The Motley Fool UK.

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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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