Is it too late to buy Tesla shares?

Tesla's momentum (NASDAQ 🙂 is currently making it perhaps the most exciting stock there is. While analysts race to improve their price targets after the company has revealed encouragingly in the last two quarters, shares have already doubled this year.

The rise has been so rapid and furious that Tesla shares have now risen 118% before 2020 – better than any individual stock in the. The rise in Tesla over the last five trading days even marked the period as the best five-day trajectory for the stock since a rally in May 2013, when the company recorded its first quarterly profit ever. On Tuesday alone, shares rose by a further 14% to $ 887.06.

Tesla's monthly rate chart

This stunning rally has brought Tesla's market capitalization to around $ 160 billion, giving the electric car manufacturer a higher rating than that of General Motors (NYSE :), Fiat Chrysler (NYSE 🙂 and Volkswagen (OTC 🙂 combined.

If you have not yet invested in Tesla shares or if you have not followed this story closely, you may be wondering whether you have already missed the boat and whether it is just too late to buy in stock after such a powerful run.

There is no simple answer to this question. And indeed, Wall Street is still very divided about Tesla's prospects.

On the one hand, Tesla bulls are partying on the fuel generated by Tesla's record deliveries in the fourth quarter, as well as its plans to deliver more cars worldwide in 2020.

The completion of its Shanghai plant and the company's success in surpassing its ambitious goal of selling 360,000 vehicles for the year also provide a powerful sign that Tesla can quickly become a major player in the industry as it continues to achieve its objectives.

Fundamental shift

And with the improvement in the number of Tesla and the founder and CEO Elon Musk, which now promises profit every quarter, there is also a fundamental shift in the automotive industry.

According to a Bloomberg report, the long-established assumption that older automakers will overtake Tesla in the electric vehicle market is incorrect. In fact, Musk could increase its lead and at the same time ensure that the company dominates one of the real growth markets in the world in the coming years.

"There is recognition that Tesla has a leading position in the field of electric vehicle technology," said Peter Rawlinson, CEO of Lucid Motors Inc., at the BloombergNEF San Francisco Summit. "They run even further than reported and I think the gap is widening and not narrowing."

A number of analysts are added to the rally to upgrade Tesla's stock. Argus analyst Bill Selesky raised Tesla's price target to $ 808 from $ 556, citing the company's "dominant position in the electric vehicle industry."

calls for caution

Oh, on the other hand, and amid this feverish revaluation of Tesla's shares, there are also many analysts who ask for caution and do not believe that the story of Tesla is as bright as it looks.

Citron Research, the stock commentary site founded by well-known activist short-seller Andrew Left, tweeted Tuesday that Tesla & # 39; s own chief executive officer would bet against the shares if he was fund manager and named the shares & # 39; the new Wall Street casino. "

In a commentary on the rapid rise of Tesla, Gordon Johnson of GLJ Research stated that the share increase was a bubble that & # 39; effective Bitcoin on wheels & # 39; is.

The 14-day relative strength index (RSI), a measure of the extent and persistence of price movements, is a whopping 92.5 for the automaker. In December 2017, when Bitcoin, known for its savage volatility, traded up to $ 19,511, the 14-day RSI 91 could not break, according to data from Bloomberg. As a rule, analysts regard an asset as overbought when the RSI passes 70.

On the demand side, it is not clear whether China will soon become a profitable enterprise for Tesla. The sale of electric vehicles has weakened in China in recent quarters as the government reverses subsidies on vehicles with alternative energy.

A slowing car market in China, the abolition of US tax credits for Tesla buyers and the risk that Musk again fails to deliver on his promises are some of the main obstacles that can delay the rally of shares in 2020.

Bottom Line

There is little doubt that Tesla is back on the right track after boosting its production and building a factory in China that could represent a breakthrough for the company's long-term profitability.

But the automaker has only had a handful of profitable quarters in its history and has never been profitable on an annual basis. Without this track record, we would not recommend buying Tesla shares at these extreme levels, especially given the history of the stock of dramatic economic cycles.

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