Tesla Stock Rises 4% on Musk’s Shift in Ad Strategy

Highlights

• Tesla held its annual shareholder meeting on Tuesday.
• Elon Musk said the company will consider advertising for the first time.
• The stock is up 4% in response.

Tesla stock is up 4% today to $173 per share on the heels of the company’s spring shareholder meeting. Elon Musk revealed that the EV maker could pursue a shift in strategy around advertising. Until now, Musk has relied on a zero-ad model. But after being pressed about it at the meeting, he’s now willing to experiment with ads. 

“So I guess I should say advertising is awesome, and everyone should do it. We’ll try out a little advertising and see how it goes,” Musk stated at the meeting.  

It’s a 180-degree turn from Musk’s previous stance on advertising. In recent years he has expressed his disdain for advertising and committed instead to directing that part of the budget toward production. However, times have changed and he is looking to capture a greater segment of the population. 

The economic environment coupled with increased competition in the EV space has led Musk to lower prices on certain Tesla models. Twitter, Musk’s other company, is heavily entrenched in the ad model. And now Musk is willing to see if it produces results at his car company, too.

Tesla Stock

Tesla is looking to be a growth story, and not just in EVs. The company is also focused on the production of other products, including HVAC and solar solutions. Musk also has his sights set on the robotics arena as a long-term play. 

Gene Munster at Deepwater Asset Management told CNBC said that even if Tesla only hits in two of those categories, it still stands head and shoulders above other automakers in terms of growth opportunities. Tesla also expects to begin delivery of its much-hyped Cybertruck this year. 

He warns that the road ahead for Tesla could be “bumpy,” given the size of the market it is pursuing. But considering its head start, Munster says that Tesla has momentum on its side in the coming quarters.

For much of 2023, Investors have been concerned about Tesla’s margin. The worry is that price cutting will take more of a toll on profits. Tesla’s Q1 already showed evidence of this when profits fell short of expectations.

Any more pressure on the profit margin, to say 15%, could further pressure TSLA stock in the short-term, Munster noted. But even if that’s the case, the profitability pendulum will swing back to Tesla’s favor eventually.