Why the Tesla share price jumped 13% in June

Jon Smith explains some of the recent drivers behind the June double-digit rally in the Tesla share price and explains what he’d do now.

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The FTSE 100 index fell 1.3% over the course of the last month. By contrast, some stocks across the pond in America performed much better. For example, Tesla‘s (NASDAQ:TSLA) share price increased 13% over the same period. Here’s what drove the gains for the electric vehicle (EV) giant.

Musk continues to be key

Part of the boost for the stock’s come from a successful resolution of the charismatic Elon Musk’s compensation. Despite several months of dispute regarding historical pay and even lawsuits, shareholders voted overwhelmingly to approve his $48bn pay package.

This was taken as an overall positive because it keeps Musk happy and also focused on driving Tesla forward. Few would say that Musk isn’t key in helping Tesla to grow, as he has been front and centre of it from the beginning.

Another factor was the press coverage from a Tesla event in Austin, Texas. This relates to the moving of the firm there from a legal perspective, as well as the HQ. At the event, Musk spoke about Tesla’s future. He commented that it’s possible for Tesla to have a $30trn market-cap someday, given the growth potential. When I consider that the current market-cap is $630bn, there’s clearly scope for large share price gains if this comes to fruition.

A broader market boost

Aside from company specific factors, Tesla shares were caught up in the general positive vibes from the broader US stock market in June. The main indices, including the Nasdaq 100 and the S&P 500, both finished the month higher. This good mood helped to lift a lot of stocks, with Tesla included.

Let’s also not forget that Tesla is a member of the so called Magnificent 7. This means when investor sentiment’s high, this group in particular tend to do well.

Short-term rally but still down

For July, it looks like Tesla shares can continue to push higher. Yet even after the June run, the stock’s still down 24% over the past year.

This speaks to one of the large risks, namely that some are concerned that demand for EV is slowing. Some believe that competitors are going to eat away at its market share, which would be a negative factor. Although we won’t get a clear answer on these points in July, it’s definitely something that long-term investors will be pondering.

I don’t have a lot of free cash for growth stocks right now, but even if I did I think I’d prefer to allocate my money to other sectors right now, such as artificial intelligence (AI). That’s not to say I don’t think Tesla shares could do well, but I think there are better options out there at the moment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith 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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