The Tesla (TSLA) share price has surged and then corrected over a span of ten trading sessions. This begs the question: Has the Tesla share price topped out?
In November 2021, Elon Musk has achieved what no other human being did before. His net worth rocketed north of $300 billion dollars. This is the largest fortune ever recorded.
Soon after, under the cover of a Twitter poll, Musk sold a $7 billion stake in Tesla to pay for some of his federal taxes. Still, after the sale, Mr Musk’s stake rounds off to an astounding $280 billion.
The fact that Tesla’s share price have surged despite the increased competition from other auto titans makes no sense. Jeremy Grantham told interviewers recently that Tesla is a bubble. Competition is heating up; Tesla’s current share price is priced for monopolistic profits, which is unlikely to happen.
Needless to say, Tesla is a polarising stock. It is a “monster” stock because its trends defy gravity and financial sanity. Very few stocks can rally from $100 billion (market cap) to $1 trillion in such a short time.
After achieving such an optimistic pricing, Tesla will need to deliver the actual results to match the elevated expectations. If not, prices may correct sharply.
Tesla ended last week at $1,033.
Tesla is popular stock. It was the most-traded stock on many brokerages, including ones in the UK! Look at AJ Bells‘s top buys and sells (youinvest.co.uk) – it was all Tesla!
The stock had a very sharp rally over the past two months. Prices trended gently higher – and then went parabolic. The gap above $900 signaled buying panic. Prices shot up 25% shortly after.
Given such a strong uptrend, those who tried to short Tesla are nursing painful drawdowns – if they are still in the trade at all.
However, uptrend accelerations often signal that the trend is ending. We would not be surprised if prices return to the former peak at $900 to reaffirm that level as support.
Given Tesla’s strong price trend, you would assume that most analysts would be bullish on the stock.
Not so. In fact, the Tesla forecasts are split. According to the Financial Times aggregation of 40 brokers, 4 are outright ‘Sells’ while another 19 say ‘Hold’ or ‘Underperform’. This is not a really bullish consensus.
What is going on with the Tesla shares price then? Well, perhaps the recent rally has spooked the investment community and investors do not want to chase the stock higher.
Anyway, when dealing with a hugely volatile stock like Tesla very few will get it right. Fundamentals only play a minor role these days. The key is the psychological makeup of the stock. If many traders believe that Tesla will go ‘to the moon!’, then prices will keep rising.
A ‘Giga Fest’ was held in Gruenhide last Saturday by Elon Musk, the billionaire CEO of Tesla, as he announced that the new Giga Factory will be ready to roll vehicles off its production line by December 2021. And in 12 months’ time, this factory will be able to produce 5-10k vehicles per week.
Apart from new factories and models, Tesla cars have been selling like hot cakes in a number of countries. Last month, Tesla sold more than 56,000 cars in China alone – the highest level in that country. In Germany, where the Giga-Factory is located, Tesla Model 3 outsold the Big 3 (Audi A4, Benz C-Class, BMW 3) combined last month.
When you stack all these news together, the Tesla juggernaut is moving at speed into the new electrified world of motor transport.
No wonder Tesla’s share prices is up and running too, trading near $800 this week.
Tesla’s share prices is bullish. While this stock is volatile, in recent months prices have been going up steadily.
The rebound off $550 has surpassed the April peak at $750. In doing so, it sets the stock up for a re-test of the all-time highs near $900. Prices have been bouncing off the 150-day moving average.
Tesla’s long-term chart clearly shows the pattern of rising lows. The sustained buying pressure indicates that prices may eventually reach the magical $1,000. Who knows, Tesla could become the first carmaker to attain $1 trillion in market capitalisation by the end of the year – up from $790 billion now.
Tesla was one of the few ‘wonder’ stocks in 2020. Prices soared nearly 10x from its pandemic lows as investors bet on a paradigm shifts in motor transport – the electrification of cars.
As Tesla’s share price outperform every forecast, each prediction became bolder. Ark Invest, a $40-billion fund group headed by the Cathie Wood, has pencilled in a $1,400 target.
However, not everyone is as bullish as Ark Invest. According to some estimates, the consensus price target is around $621 (see below). About half the broker panel is recommending ‘Buy’. The rest are either ‘Hold’ or ‘Sell’. So there is quite a disparity of opinion about Tesla in Wall Street.
At this point, however, Tesla is showing greater bullishness than what brokers are saying. It maybe wise to stay with the market.