Tesla Stock Forecast and Price Prediction June 2021 – Is Tesla a Good Stock to Buy?

Tesla is among the most exciting yet polarizing stocks of our times. The stock gained 740% in 2021 but has looked weak in 2021. It is down 2.5% in June so far and is underperforming the S&P 500. What’s the forecast for the stock in June and is it a good stock to buy?

2021 started on a positive note for Tesla and other green energy companies. The momentum in electric vehicle stocks gained momentum after Democrats took control of the House.

President Joe Biden and green energy

Biden re-joined the Paris Climate Deal that his predecessor Donald Trump had withdrawn from. Also, the Biden administration has mandated to convert the federal fleet to zero-emission vehicles. The administration has also proposed massive investments into the green energy sector.

Tesla is the most popular name in the green energy industry. While its core automotive operations get all the attention, the company also has solar and energy storage operations. So far, these businesses don’t account much for Tesla’s revenues but the company’s CEO Elon Musk believes that the energy business will be eventually as big as the automotive business.

Tesla stock technical analysis

Tesla shares fell below its 50-day SMA (simple moving average) in February and has since failed to move past the line. The stock has been moving between its 50-day and 200-day SMA which currently stand at $653.31 and $609.39 respectively. The stock is getting near the 200-day SMA which has been strong support for the stock.

Tesla stock has a 14-day RSI (relative strength index) of 47.6 which is neutral. The MACD (moving average convergence diverge) level is -11.07 which gives a buy signal. Overall, Tesla looks neutral on the charts. The stock needs to break above the 50-day SMA to signal a technical uptrend.

Analysts are divided on Tesla shares

Tesla’s average target price is $639.81 according to TipRanks. The stock’s lowest target price is $67 while its highest target price is $1,080. It is tough to find a share with such dispersion in analyst target price. Its highest target price is over 16 times its lowest target price which is quite unusual for any stock.

Overall, of the 23 analysts covering the stock, 10 have a buy rating while six have a sell rating. The remaining seven analysts rate the stock as a hold. To understand the divergence in analyst opinion, we would have to dive into Tesla’s business model.

Tesla’s business model

Currently, Tesla gets most of its revenues from the core automotive business. It is also scaling up the energy business. However, the real value for Tesla investors would come from the software part of the business. Tesla currently charges $10,000 for the FSD (full-self driving) option and Musk expects the service to cost $100,000 eventually. The company has been gradually raising the price for the FSD.

Here it is worth noting that the name FSD can be misleading as autonomous driving is not fully equipped yet and even Tesla advises car drivers to keep their hands on the steering all the time even if the car is on autonomous mode.

Tesla stock valuation

If we value Tesla as an automotive company, it is not possible to justify its valuations. The stock trades at an NTM (next-12 months) EV (enterprise value)-to-sales multiple of 11x while legacy automakers like Ford and General Motors trade at an NTM EV-to-sales multiple of 1.3x.

Looking at the financial performance, Tesla has turned sustainably profitable and its GAAP profit margin was above 4% in the first quarter of 2021. However, a closer look at the profits will tell us that these have come entirely from the sales of carbon credits. Also, in the first quarter, the company booked $102 million in profits on the sales of bitcoins.

However, that might not be the prudent way to value Tesla stock. It is a long-term growth story and expects its sales to increase at a CAGR of over 50% for the next many years. The company is setting up two new plants in Berlin and Texas. Recently Musk also talked about setting up a plant in Russia.

What do analysts think of Tesla?

Wedbush Securities is among the most bullish brokerages on Tesla stock. Earlier this month, it reiterated its buy rating and $1,000 target price after the company canceled the high-end Tesla Model S Plaid+ model.

“We believe this year Tesla with a strong 2H can near 900,000 annual deliveries and track towards 1.3 million in 2022 with the Cybertruck adding to the overall EV demand story,” said Wedbush analyst Daniel Ives.

Tesla will launch the pickup truck Cybertruck sometime next year. The model would compete with Ford F-150 Lightning. The ICE (internal combustion engine) of the model has been America’s best-selling pickup truck for the last many decades. The model will give a tough fight to the Cybertruck. It would possibly be the first time when a Tesla model will be pitted against a comparable best-selling model from a legacy automaker.

Higher competition in the electric vehicle industry

Competition has been increasing in the electric vehicle industry and even Ives admitted to higher competition. “In a nutshell, competition is increasing from all angles in this EV arms race which has been an overhang over Tesla and the overall sector, however this is just the start of an EV transformation that will change the auto industry for the coming decades with Tesla leading the charge,” said Ives in his note.

That said, Tesla has been a story of faith that retail investors have had in the company. While the stock’s valuation could be way too high for some valuation models, retail investors have been bullish on the stock and buying every dip.

Tesla short interest

While meme stocks are getting a lot of attention amid the Reddit-driven short squeeze, Tesla has been possibly the original meme stock and short-sellers have lost billions over the last three years betting against the Elon Musk run company. The stock’s short-interest ratio is only about 4.2% according to the most recent filing. While several long-time Tesla shorts like Jim Chanos have trimmed down their bearish bets, in the first quarter Michael Burry of The Big Short fame, revealed a massive short position in Tesla stock.

If you are comfortable with the high valuations, Tesla is among the best names to play the green energy and autonomous driving industry.

Looking to buy Tesla stock now? Invest at eToro!

75% of all retail investor accounts lose money when trading CFDs with this provider.