By Aditya Soni

(Reuters) -Tesla shares jumped about 7% on Monday after better-than-expected quarterly deliveries showed that Chief Executive Elon Musk’s plan of boosting volumes through discounts was working.

The day’s gains lifted the top U.S. electric-vehicle manufacturer’s market capitalization by around $57 billion to $887 billion.

At $277, the stock has already more than doubled in value this year and risen far above price targets set by analysts, prompting caution from some brokerages that margins will suffer because of the aggressive discounting spree.

Meanwhile, Irvine, California-based electric vehicle maker Rivian Automotive on Monday topped market estimates for second-quarter deliveries after struggling for months to ramp up production due to supply chain issues.

The stock, which hit the highest in more than four months, closed up 17.4% in a holiday-shortened session.

Analysts have said stable demand and efforts to combat supply chain woes by developing an in-house drive unit could help Rivian grab market share in an increasingly crowded market.

Tesla (NASDAQ:)’s price cuts helped it deliver 466,140 vehicles in the April to June period, up 10% from the preceding quarter and 83% higher from a year earlier. The gap between how many cars Tesla produces and delivers also narrowed to 13,560 in the second quarter from 17,933 in the previous three months.

“Tesla’s price cuts are working in a big way,” said Gene Munster, managing partner at investment firm Deepwater Asset Management. “The average growth of deliveries over the previous seven quarters was 50%. This (quarter) marks a measurable step up in growth.”

At least eight analysts raised their price targets on Tesla stock, with several saying Tesla’s annual deliveries target of about 1.8 million vehicles now seems conservative as it already handed about half of that in the first six months of 2023.

The median price target on the stock stands at $210, which is about 20% below its last closing price. Tesla has a forward price-to-earnings ratio of around 62.9, far above Ford’s 8.82 and near the 62.66 of Amazon.com (NASDAQ:).

“The key question for investors is what might margins be,” Bernstein analyst Toni Sacconaghi said in a note.

“We continue to believe that Tesla will need to further lower prices this year and/or next year to achieve its volume targets, incrementally pressuring margins.”

The company reported total gross margin of 19.3% in the first quarter. Wall Street expects the measure to dip to 18.6% when the company reports second-quarter results on July 19.