Tesla (TSLA) is like a cult stock. First driven by the wunderkind entrepreneur Elon Musk, then by the coolness of its EVs. Tesla’s revolutionary electric cars have created a new space in the auto market. A rare feat; hence, the wide following. But, the stock is notoriously volatile, so what will 2024 hold and will the Tesla share price go up?
AI
Tesla’s advanced ‘giga factories’ (list of them) are a generation ahead of its competitors. Robots are now assembling cars in these factories.
“Our humanoid robot,” wrote Tesla in the latest quarterly report (Oct ’23), “is currently being trained for simple tasks through AI rather than hard-coded software, and its hardware is being further upgraded.” No wonder traditional auto giants are despairing and fighting to stay relevant. Tesla is cementing its lead by the day.
Constantly amazing
Tesla never ceases to amaze customers. Just this month, the $800-billion company released its newest ‘Cyber Truck’ (Official Video). Is this a new profit stream or a costly reality? No one knows. But with its free cash flow accumulating, Tesla can afford a few mishaps.
Inevitably, in the long run, Tesla’s stock price will be determined by its profits. Right now, investors are feeling sanguine and optimistic. Deliveries are rising; revenue increasing.
In 2023, Tesla shares rebounded from $110 to $280 to net a hefty 150 percent rally. Short-sellers, unsurprisingly, are howling in pain here.
With firming technicals, steady fundamentals and a better macro outlook, Tesla’s share price may continue to bring joy to shareholders.
Dangers
The bigger they are, the harder they fall though, so what could cause Tesla price to fall in 2024?
In recent weeks, the market is anticipating a more accommodative monetary stance in 2024.
With inflation rates falling, investors are dialling down the idea of ‘higher for longer’ (to the point of perhaps getting ahead of themselves). Instead, investors are expecting modest rate cuts.
Will this materialise? Chances are rising, but in financial markets, nothing is certain – and certainly not in today’s choppy environment.
Should the Fed defy market expectations, we envisage a subdue equity market, particularly tech stocks. (Broadly speaking, Tesla is valued like a tech.)
Moreover, not every analyst is convinced that Tesla’s stock price can sustain its upward momentum. According to an aggregation of Tesla share price forecast, the number of neutral/underperform recommendations has increased markedly over the past year. Wall Street is uncertain that Tesla’s share price can repeat last year’s rally and this is reflected in the broad range of price forecasts. Some even expect Tesla’s share price to slump into double digits.
The last point is, of course, an economic slowdown (or even a recession) in the US. During a cyclical downturn, consumers tend to slow or defer purchases, especially big-ticket items like cars. This will hit Tesla’s bottom line. But again, this bearish scenario is debatable. The high-interest rate regime is definitely taking a toll on economic activity. But a deep recession? That’s not appearing in the economic data definitively (yet).
In summary, Tesla may avoid a big slump like 2022. However on the horizon appear a number of risks. These negative factors may cause Tesla to correct in the next 12 months.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
