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Tesla Stock Soars Despite Plunging China Registrations

Tesla stock (TSLA) is still soaring today even though registrations for its vehicles made in China plunged in July. It seems a price target increase from an analyst and a five-for-one stock split are boosting investor euphoria to the point that bad news from China doesn’t even matter.

China registrations don’t weigh on Tesla stock

Bloomberg reported on Monday that registrations of Tesla vehicles made in China plunged last month, but Tesla stock wasn’t even affected by that. Data from the state-backed China Automotive Information Net reveals a 24% month-over-month decline in registrations of Tesla vehicles made in China.

There were 11,456 Tesla vehicles built in China and registered in the country last month. The automaker doesn’t reveal how many vehicles it sold in China with its earnings reports. Tesla started delivering vehicles made at its factory near Shanghai earlier this year.

China has played a major role in Tesla’s growth plans outside the U.S. In fact, at least one analyst has been touting China registrations and sales as a key part of Tesla’s stock valuation.

China’s vehicle market has been recovering from a slump that has lasted about two years. Even as the Chinese auto market struggled, Tesla sales in the country had been going well before July.

Tesla

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Competition in China could weigh on Tesla stock

The company is up against a growing number of domestic competitors, which started to take a bite out of Tesla sales in July. NIO reported that its deliveries more than quadrupled last month, reaching 3,533 vehicles. The Chinese EV maker is also getting ready to launch a new crossover coupe and sedan.

Non-Chinese automakers are also releasing their own electric vehicles in China. Daimler AG and BMW are getting ready to launch their own electric vehicles there.

Competition isn’t Tesla’s only problem that could weigh on vehicle registrations and potentially its stock. Bloomberg reports today that the EV maker is in a dispute with Chinese e-commerce giant Pinduoduo, which ran a Model 3 promotion that Tesla said went against its policies.

Auto retailer YiAuto ran a promotion on Pinduoduo for a Model 3 that was about 7% less than Tesla’s official price. The automaker denied it was competing with Pinduoduo and YiAuto and said the buyer who bought the Model 2 won’t receive the standard rights offered to those wo buy their vehicles through official channels.

Analyst boosts price target for Tesla stock

Tesla stock soared above $1,900 for the first time on Monday after Wedbush analyst Daniel Ives boosted his base case price target to $1,900. The new price target is the fourth-highest target on Wall Street. This marks the eight time Tesla stock has climbed more than 30% in four days.

Although Ives raised his price target to $1,900, he maintains his Neutral rating on the stock. Interestingly, he cited signs of accelerating demand in China — despite the news about plunging vehicle registrations in July, which was reported the same day.

The average price target for Tesla stock is $1,235.37 per share, which is 32.7% lower than the closing price on Monday. Ives’ bull case price target is $2,500 a share.

He believes that demand for electric vehicles in China started to accelerate in July and August as Tesla competes with both domestic and international competitors for market share in the country. He called Gigafactory 3 the “linchpin of success which remains the prize that [CEO Elon] Musk and Tesla are laser focused on capturing.”

Ives also believes the company’s price cuts could stimulate demand in both China and the U.S. He also expects Tesla to announce several “game changing” battery developments at its upcoming Battery Day, which is set for Sept. 22. One of those announcements could be a “million mile” battery, which would support an EV for 1 million miles and push EV technology further in competition against gasoline-powered vehicles.

By Michelle Jones