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In the past 2 decades, few stocks have been as exciting and controversial as Tesla. The company aims to fundamentally change the world by disrupting one of the essential industries.
Not only did it make a lot of money for his investors, Tesla made Elon Musk one of the most powerful CEOs in the world. However, market participants are rightly skeptical of Tesla’s stock increase.
Read on to learn more about the current stock position and market sentiment for the company.
TSLA stock market position
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Tesla has just released its production and delivery figures for the third quarter of 2020. The company produced 237,000 vehicles while it has delivered 241,000. These figures bring it closer to the annual production volume of 1 million units. Meanwhile, national brands like Ford produce more than 4 million vehicles a year, and the international leader Volkswagen Group manufactures 9.3 million.
With a market cap of $ 788 billion and a price tag of nearly $ 800, Tesla is trading at 20 times the sales price, which is unusually high for an automaker regardless of the future.
While investing in the EV industry is thematic (the market will rise significantly), potential Tesla investors will need to lower their expectations as market capitalization increases. Currently it is the 7e largest company in the S&P 500 stock index.
TSLA share price forecast
The current market sentiment is mostly bullish. Here is the recommendation score among the 42 analysts:
- Buy: 17
- Outperform: 1
- Hold: 13
- Underperforming: 3
- Sell: 8
You can see the visual presentation of 36 analysts offering 12-month price forecasts for Tesla in the graph below.
Tesla stock forecast; source: CNN Affairs
The median estimate is $ 776, with the high estimate of $ 1,591 and the low estimate of $ 67. These are very different perspectives, representing a 100% gain and a 91.5% loss from the current level.
Bull Case by Chaim Siegel for TSLA Stock
Chaim Siegel is the founder and director of US equity research firm Elazar Advisors. His expertise lies in research on equities and fixed income securities. Prior to founding Elazar Advisors in 2004, Siegel worked as an analyst at Morgan Stanley and under Steve Cohen at SAC Capital.
Siegel made his bullish argument by estimating Tesla’s potential revenue to be around $ 55 billion, far more than the consensus estimate of $ 49.35 billion.
Its earnings per share (EPS) model predicts at least $ 22 for 2022, resulting in a price target of almost $ 1,600 using the price / earnings multiplier of 65 – which is not unreasonable for a stock growth but optimistic for an automotive company.
Toni Sacconaghi’s bear case for TSLA actions
Toni Saccohaghi is a senior research analyst at AB Bernstein. Prior to this position, he worked as a consultant at McKinsey & Company.
Saccohaghi has a Tesla price target of $ 300, indicating a potential downside of 62%. For his research, he uses methods such as discounted cash flow and multiple price / free cash flow. Its current EPS projection for 2022 is $ 6.59.
Unsurprisingly, he’s worried about the valuation of the company, referring to the fact that it involves huge volume and industry-leading profitability going forward, which is historically unprecedented. He also pointed out that price competitiveness does not go hand in hand with improving profit margins, which brings us back to the profitability concerns of the auto industry.
TSLA share price history
After a huge rally in 2020, Tesla has been in a range for most of this year, likely awaiting catalyst news as was the case with inclusion in the S&P 500 Index.
The stock is currently above the two most popular moving averages, 50-day and 200-day.
TSLA stock chart; source: BenzingaPro
From a technical standpoint, the chart looks somewhat bullish and it is starting to look like a bullish flag.
In this case, the technical top price target would be equal to the distance from the base to the flag pole – 450. Added to the resistance of 900, this would give you a top price target of $ 1,350.
For more information, you can read Benzinga’s guide to bullish flag patterns.
Where to buy Tesla shares
With phone calls and brokerage in the rearview mirror these days you can buy stocks online simply through web platforms or even phone apps. In the list below, you can find our recommended brokers for buying TSLA shares.
How long will it take for TSLA stock to reach $ 1,000?
Tesla is a relatively volatile stock. Over the past 5 years, his average monthly beta has been 1.89. This means that it is moving 89% more than the market average.
At the same time, over the past year, its weekly volatility has remained stable at 4%. As the stock is currently trading at close to $ 800, a level above $ 1,000 equates to 25% upside.
In an orderly fashion that takes at least 6 weeks, you must remember that flare-ups are rarely orderly. They usually occur in short bursts, followed by long periods of lateral movement.
For Tesla, the next big catalyst is the earnings report on October 20, after the market closes.
Optimism in moderation
In the past year, very few companies have been able to match Tesla’s growth. Although it took years for the company to achieve profitability while producing a fraction of the market, it has become the most valuable automotive brand in the world.
Still, with a market valuation of $ 800 billion, investors need to be realistic and look for reasonable returns. That doesn’t mean the stock can’t double (as some analysts are predicting), but it does mean big profit surprises and hundreds of billions of dollars in new investment.
Frequently Asked Questions
Is Tesla Stock a Good Investment?
Is Tesla Stock a Good Investment?
Although the company remains the leader in the electric vehicle market, major car manufacturers such as Toyota Motor Corporation or Volkswagen AG are entering the market. Increased competition steadily decreases profit margins and slows growth.
Over the past 5 years, Tesla has proven to be a fantastic investment with a return of over 1,500%.
It’s hard to expect similar returns over the next several years as it now has a market cap of $ 777 billion and is only 10% off the all-time high.
Do Tesla Cars Retain Their Value?
Do Tesla Cars Retain Their Value?
It highly depends on the model. For example, the Tesla Model 3 was only stellar, with the average 3-year-old car retaining 77% of its value. For comparison, an average vehicle retains only 62% of its value after 3 years.
Meanwhile, Tesla Model S retains 58% of its value after 3 years and only 41% after 5 years, which is disappointing because it is a much more expensive vehicle.
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