Tesla (TSLA -0.32% † stock has the pedal to the metal. For the eighth day in a row, shares of the electric car superstar roared higher — up 2% as of 11:45 am ET on Thursday.
A couple of positive news items today may explain why Tesla shares continue to zoom higher.
news item no. 1: You probably heard last year when rental car kingpin Hertz said it was ordering 100,000 pricey new Teslas to add to its rental car fleet, right? At first, those were going to be largely Model 3 sedans, Tesla’s cheapest electric car (if still not exactly cheap at $47,000). Well, last night, Reuters reported that Hertz will also be buying some Model Y crossovers from Tesla as well — and those electro-buggies don’t roll off the car lot for less than $63,000.
Long story short, for every single Model Y Hertz buys from Tesla, instead of a Model 3, Tesla investors can expect to see 34% more revenue for their Tesla stock.
Selling electric cars is good business for Tesla, accounting for about 95% of Tesla’s $53.8 billion in revenue last year, according to data from S&P Global Market Intelligence. But electric cars don’t go very far without batteries to operate them — which brings us to news item No. 2:
As Reuters also reported last night, one of Tesla’s battery suppliers, LG Energy Solution, has announced that it will spend $1.4 billion to build a battery factory in Arizona. LG says the factory will supply both “prominent start-ups” and other car companies in North America, presumably referring to LG customers Lucid Group and also to Tesla.
Reuters reports that the new LG factory won’t reach “mass production” levels before 2024, but construction will begin in Q2 2022 — which begins just eight days from today, and promises a relatively quick influx of new battery supplies for Tesla. Considering that Tesla CEO Elon Musk has highlighted battery supply as “the limiting factor” (emphasis added) in Tesla being able to ramp up car production over the next few years, LG’s entry into Arizona can only be good news for Tesla stock.
And that’s exactly how Tesla investors are treating it today.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.