Tesla Stock Had a Great Day. Explaining Why Isn't Easy. - Barron's

Tesla head Elon Musk arrives to have a look at the construction site of the new Tesla Gigafactory near Berlin on September 03, 2020 near Gruenheide, Germany.

Maja Hitij/Getty Images

Shares of Tesla gained big on Monday. There wasn’t much good news to pin the gains on. A report Tesla is testing a technology recently panned by CEO Elon Musk seems to be the biggest news item. But investor reaction to that technology’s adoption would not necessarily send shares higher.

Tesla (ticker: TSLA) stock closed up 4.4% Monday to $606.44. The S&P 500 and Dow Jones Industrial Average, for comparison, gained 1% and 0.5%, respectively. The Tesla gain snapped a trend of three consecutive losing Mondays.

So what sent shares soaring?

Wells Fargo  initiated coverage of the company Monday. But analyst Colin Langan ‘s rating was Hold and his price target $590 a share. A Hold rating isn’t a bullish call on any stock.

Langan wrote deliveries would continue to surprise, but he had three concerns related to competition, rising costs, and autonomous vehicles that kept him on the sidelines. He doesn’t see the stock doing much of anything for the next few months.

Bloomberg reported that Tesla was testing lidar sensors from Luminar Technologies (LAZR). Lidar is short for laser-based radar. It is part of most auto makers’ plans for self-driving vehicles. Lidar sensors can see in different conditions than radar, optical cameras, and sonar. What’s more, they can help build a 3-D image of the world cars need to operate without human intervention.

Musk, however, has eschewed lidar technology. Tesla is trying to achieve full autonomous driving with optical cameras. And Musk famously said he wouldn’t use lidar sensors if they were free on Tesla’s third-quarter conference call in October 2020.

Adopting lidar isn’t necessarily a good thing for Tesla stock. Adoption calls into question the company’s optical-only strategy. It also raises the possibility that Tesla’s autonomous driving features, called Autopilot and Full Self Driving, are progressing at a slower than expected rate. On the other hand, Tesla might simply be monitoring the state of the art.

Luminar and Tesla didn’t respond to a request for comment.

Luminar shares traded higher early in the day when the report was published, but closed down 1%.

The best reason Tesla stock is up might just be the fact that it has been down. Shares have fallen for five consecutive weeks.

A few issues have weighed on the Tesla stock. The company’s trading of Bitcoin, followed by its decisions to accept, then not accept, Bitcoin as payment for vehicles has created a distraction for investors. Tesla also dealt with some confusion over a Texas crash, which was thought to involve Tesla’s driver-assistance features until crash investigations by the government preliminarily concluded that the features were most likely not turned on. Tesla has also faced delays in building its new German assembly plant.

Whatever the reasons, there has been a lot for Tesla investors to think about. Shares are down about 14% this year after rising 743% in 2020.

Write to allen.root@dowjones.com

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