Text size

Tesla shares are at it again, rising for the ninth straight day. The stock rose 2.1% to more than $745 Thursday.

The shares (ticker: TSLA) have been on a seemingly unstoppable run. They are up roughly 65% since April 2, when the stock had the audacity to drop 5.6% to just $454 a share. The stock is now up about 80% year to date, crushing the comparable double-digit drops of the S&P 500 and Dow Jones Industrial Average. Whats more, shares are up more than 30% for the week. The Dow is down for the week. The S&P is up slightly.

The gains are leaving investors wondering whats going on. In short, lots.

Tesla stock was upgraded recently to Hold from Sell by Credit Suisse. Goldman Sachs launched coverage on Wednesday with a Buy rating, further boosting shares.

(No new Street research on Tesla was published Thursday, based on data from various news-aggregation sites.)

When any stock spikes, short covering is often cited. Tesla shares are more heavily shorted than shares of other companies. About 20 million shares of Tesla, or 14% of stock available for trading, has been sold short. Shorting refers to bearish investors borrowing stock they dont own and selling it, betting on near-term price declines. Any recent short bets have turned out badly, which can generate a flurry of buying as short positions are covered.

Sometimes stocks rise just because that is what it has been doing. Traders love stocks with high volatility. Short-term trading gains feed on themselves. Trading gains, after all, are possible only when stocks move significantly. Conversely, it is impossible to make a lot of money trading a stock that barely moves. The change in daily value is too small. Big daily gains attract interest from many different kinds of stock-market denizens.

In addition to all of that, earnings are coming on April 29. The period ahead of a quarterly report can also generate more trading activity as investors position themselves for the coming event. Based on options markets, Tesla shares are expected to move between 10% and 20% when numbers are reported. It s a big range, again reflecting the recent volatility.

The stock has moved about 14% up or down, on average, the last three times quarterly results were reported.

The coming earnings report and conference call will likely focus on car productionwhich stopped in March because of the coronavirusnear-term sales and new product introductions. The Tesla Model Y is out and is expected to become the bestselling model the car company has produced. Americans especially love larger, SUV-size vehicles. SUVs, trucks and crossover vehicles account for a majority of U.S. car sales.

The rally has left Tesla shares trading for 400 times estimated 2020 earnings. It is a big multiple, but Tesla is growing fast. The stock trades for 64 times estimated 2021 earnings of almost $12 a share.

Tesla has also left its peers in the dust. Other U.S. auto makers stocks are down about 45% year to date. Car parts providers are down about 40% year to date. The Russell 3000 Auto & Auto Parts Index is down just 11% year to date, but Tesla is more than half of the Index, measured by market capitalization. In fact, Tesla is worth more, at $136 billion, than the other 23 members in the index combined.

Write to Al Root at allen.root@dowjones.com

Read more:

Tesla Stock Rose for the 9th Straight Day. Heres Whats Behind Its Run. - Barron's