Looks like there's nothing to derail Tesla's (NASDAQ 🙂 stock right now. Each dip is only the prelude to a new upward move that is driving electric car maker stocks to new highs.
Here's the final example: Since CEO Elon Musk tweeted on May 1 that Tesla's stock price was too high, shares have surged another 29%, bringing this year's profit to a whopping 140%.
TSLA Weekly 2017-2020
On Wednesday, the stock reached a new benchmark, for the first time over $ 1,000 per share, to close at $ 1,025.05, up nearly 9% for the day.
This remarkable rally continues despite factory closings and demand destruction due to the crisis triggered by the COVID-19 pandemic. But Tesla investors are focused elsewhere. They have focused on the post-pandemic boom in which Tesla is ideally positioned to take advantage of its lead in the electric vehicle market.
Analysts point to strong evidence that the automaker has been able to turn the corner after a series of miscarriages in 2019. The company has been strong, delivering better-than-expected deliveries even during the coronavirus pandemic.
The latest Tesla share increase was caused by data showing that car sales in China rose for the first time in almost a year last month. Tesla cars were the top-selling electric vehicles with more than 11,000 units sold, according to the China Passenger Car Association. Overall, car sales for the Palo Alto, California-based company in China increased by 205% from an April slump attributed to the impact of COVID-19 on consumers and businesses in China.
Registrations of Tesla vehicles in China rose to a record high in March after the company resumed production at its Shanghai plant, which was temporarily shut down due to the coronavirus pandemic in Asia.
More room to run
Because of these positive developments, some analysts believe that Tesla stocks have more room to run. As he raised his price target from $ 800 to $ 1,000, Wedbush said in a note yesterday that the main catalyst for the Tesla stock rally remains the massive Chinese market that shows clear signs of a spike in demand. According to the remark:
"We believe demand for Model 3 & # 39; s is growing faster than expected in China, towards daylight savings time, lockdown easing in the US / Europe, and some potential game-changing battery developments the horizon (Battery Day probably in late June) that Tesla's stock will likely have room to move forward. ”
Indeed, the same analyst raised his bull-case target from $ 1,350 to $ 1,500 per share.
A Chinese manufacturer making electric car batteries for Tesla and Volkswagen (OTC 🙂 has contributed to the stock's conviction and has developed a power pack that will last over a million miles, according to a Bloomberg report. Contemporary Amperex Technology (SZ 🙂 has announced it is ready to produce a battery that lasts 16 years and 2 million kilometers (1.24 million miles).
“Extending that service life is seen as an important advance because the package can be reused in a second vehicle. That would lower the cost of owning an electric car, which is positive for an industry that would reduce the sales momentum lost due to the coronavirus outbreak and the slump in oil prices that made gas eaters more competitive, ”the report said.
Too late to buy?
If you have not yet invested in Tesla stock or if you have not followed this story closely, you may be wondering if the ship has sailed. Is it too late to buy after such a strong run in the stock?
There is no easy answer.
Wall Street remains highly divided about Tesla's outlook. Of the 23 analysts who cover this stock, 8 have a buy score, while a similar number recommends. Seven made it a call for sale, with $ 633 as the average price target for the next 12 months.
Tesla bulls can take advantage of the strong fundamentals generated by Tesla's improved deliveries and optimistic outlook for China. But some investment advisers warn that this dazzling rally evokes a lot of emotions, rather a mere financial justification.
Michael Hartnett, the Bank of America's chief investment strategist, typified Tesla shares as an example of "irrational exuberance" inspired by an unprecedented wave of easy money from central banks.
"Excess liquidity to fight deflation continues to create double bubbles in scarce 'yield' and 'growth' assets", Hartnett wrote last month a letter to customers.
Bottom Line
Tesla shares may continue to rise in the short term due to the positive sentiment and improving prospects for the EV market. But investors should not forget that Tesla is a very speculative game that could quickly reverse course.
After such a strong run, it is best to be careful. For investors interested in buying shares, it would be smarter to wait for another better entry point.
