As 2020 draws to a close, there are plenty of boom-and-bust stories that market viewers will remember. But no other stock excites investors as excited as Tesla, the electric car manufacturer (NASDAQ :).
By Thursday's close, shares were up more than 650% this year, making it the best player ever. That remarkable turnaround came despite the scourge that rocked the global economy and all the headlines surrounding founder and CEO Elon Musk.
Tesla 1 Year Pass.
When markets open on Monday, Tesla will be part of the Index, reaching blue chip status and enforcing one of the highest weights in this prestigious index, of which Apple (NASDAQ :), Amazon (NASDAQ 🙂 and Microsoft being a member. (NASDAQ :).
The turnaround in Tesla & # 39; s fortune came this year after the company managed to report for five consecutive quarters, the successful completion of a giga factory in China and the start of construction of another similar factory in Germany .
While Tesla's loyal investors are reaping the benefits of their faith in Musk's vision, the big question for 2021 is how to trade this stock going forward? The analyst community is divided.
Of the 23 analysts surveying the stock, eight have a & # 39; buy & # 39; rating, eight & # 39; hold & # 39; and six & # 39; below par & # 39 ;. The average 12-month target for the next 12 months is $ 389.79, a significant correction from the current price of $ 655.90.
Jefferies, while relegating Tesla to "holding" of "buying," last week, he said it was skeptical that Tesla could ever rule the auto industry.
In a note to customers, Jefferies analyst Philippe Houchois said:
"We do not believe that Tesla can dominate the industry, given the size, structure and politics of the latter. Nevertheless, the many challenges to the industry's business model provide a sustainable competitive advantage, with a 'messianic' brand going much further. extends beyond cars, from battery power to grid storage and autonomous driving. "
As stocks revised down, Jefferies raised his 12-month price target on Tesla from $ 500 to $ 650.
Lofty Valuations
A Big Challenge for investors and analysts, is how further gains can be justified for a stock trading well above the high valuations typically only enjoyed by technology companies with vastly different business models. Tesla's stock is currently trading at nearly 1,000 times earnings, compared to a paltry 14 times for General Motors (NYSE 🙂 and 54 times for the NYSE FANG + Index.
“Therein lies the dilemma. Is Tesla a car manufacturer? Or is it a technology company? Or is it a kind of combination of both? Bloomberg author Esha Dey, wrote in her analysis last week.
Tesla plans to deliver about half a million cars this year, up 36% from last year, but slower than the 50% increase it reached in 2019. According to Bloomberg data, Wall Street analysts estimate sales will increase by 26%. accelerate further this year in 2021 and then reduce to 2022. Estimates for revenues in 2020 and 2021 have hardly changed in the past two years.
But Tesla & # 39; s current valuation does not imply that it is just a car company. Tesla bulls are betting that the automaker, like Apple, will soon have a range of services embedded in its hardware that will make Tesla much more than a car maker.
Morgan Stanley analyst Adam Jonas told Bloomberg:
“Tesla takes people away from valuing and analyzing the company by using only the number of units sold and the price of the car and taking into account the installed user base and the software and content services offered to those users. In the process, you don't have to compare Tesla to auto companies and rather compare it to software-as-a-service companies. "
Bottom Line
After Tesla & # 39; s massive price hike this year, next year the automaker will continue to be under heavy pressure to show that it can grow rapidly and can quickly become a company that can make a lot of money by offering various services. Right now, it is a stock that requires investors to have complete confidence in Elon Musk's vision, rather than being judged by the company's fundamentals.
