Tesla Stock Price Forecast December 2021 – Time to Buy TSLA Stock?

Tesla stock (TSLA) fell almost 5% yesterday and was trading lower in US premarket price action today also. The company’s market cap has fallen below $1 trillion amid the recent crash.

While TSLA stock has come off its 52-week highs, it is still up 37% for the year and is outperforming most other EV (electric vehicle) stocks and the S&P 500. Last year, the stock saw a major rerating and rose 740% to become the most valuable automaker globally. What’s the forecast for TSLA stock and should you buy the dip in the Elon Musk-run company?

Tesla stock recent news: Elon Musk continues to sell

In November, Tesla’s CEO Elon held a Twitter poll on whether he should sell 10% of his Tesla stock. The majority responded in the affirmative and Musk went on a stock selling spree thereafter. He sold $9.85 billion worth of Tesla shares in November and has already sold $2.87 billion worth of shares in December. Musk is not the only insider selling TSLA shares. The company’s CFO Zachary Kirkhorn and Chief Accounting Officer Taneja Vaibhav have also been selling Tesla shares.

Here it is worth noting that while Musk is the world’s richest person, he is cash poor, and has to frequently sell shares. Musk does not take any salary or bonus from Tesla and all his compensation is in stock options. Thanks to the steep rise in TSLA shares, Musk has unlocked many stock options over the last year.

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TSLA is the most valuable automaker

Meanwhile, despite the recent crash, TSLA’s market cap is near $1 trillion, a feat no other automaker has ever achieved in history. The company has ramped up its deliveries at a fast pace and its current run rate is around a million cars annually. That’s no mean achievement for a company that was selling a few thousand cars only about five years back.

From facing a bankruptcy scare, Tesla is now a cash-rich company after it raised $13 billion through three rounds of share sales last year. The company continues to ramp up capacity and the Berlin and Texas Gigafactories would also soon come online.

Tesla stock forecast

Tesla is arguably the most polarizing companies and it also reflects in its ratings. Of the 25 analysts polled by TipRanks, 13 rate the stock as a buy while six rate it as a sell. The remaining six analysts have a hold rating. Its average target price is $982.96, which is similar to the current stock price. However, there is a wide dispersion in the stock’s target prices and they range between $215-$1,580. It is hard to think of any other stock with such dispersion in analysts’ target price.

TSLA stock target price

Wall Street analysts have been gradually raising Tesla’s target price. Earlier this month, Deutsche Bank reiterated the stock as a buy and said that no other company comes closer to it in the EV race. That said, Amazon-backed Rivian, which was recently listed, is seen as a worthy competitor to TSLA. The company has a market cap of over $100 billion which reflects the massive optimism and faith that investors have towards the company. Among pure-play EV companies, NIO and Lucid Motors would also be strong competitors to TSLA.

Last week, New Street analyst Pierre Ferragu raised Tesla’s target price to a street high of $1,580. This would mean the company commanding a market cap of $1.6 trillion. Gene Munster, another long-time TSLA bull, expects the company’s market cap to hit $2 trillion by 2023.

Cathie Wood on Tesla stock

While Cathie Wood of ARK Invest has been selling Tesla shares, she expects the stock to more than triple to $3,000 by 2025. This would mean the company’s market cap hitting $3 trillion. Wood has been among the most prominent TSLA bulls and the company hasn’t disappointed her, or the investors in ARK ETFs. TSLA is the largest holding for her flagship ARK Innovation ETF and if not for the stock, the ETF would have performed even worse this year.

TSLA stock long-term forecast

The long-term forecast for Tesla stock looks positive as it has an undeniable leadership in the EV industry. Here it is worth noting that the FSD (full self-driving) and other software capabilities of Tesla are key for its long-term success. Currently, the company charges $10,000 for the FSD option but Musk expects prices to eventually rise to $100,000 over the long term. Musk has previously said that its revenues from FSD and yet-to-be-launched robotaxis could be similar to the automotive revenues.

As for the automotive business, Tesla expects the deliveries to rise at a CAGR of 50% over the near foreseeable future.

Software business

Musk cited a hypothetical example assuming annual revenues of $60 billion. He said during the fourth quarter 2020 earnings call that, “So — and the pace you get 20 PE on that, it’s like $1 trillion and the company is still in high-growth mode. So, I think there is a way to sort of like justify the valuation of the company where it is using just the cars and nothing else, the cars with FSD.” He added, “And I suspect at least some number of investors are taking that approach.”

Tesla stock technical analysis

Looking at the charts, Tesla stock has fallen below the 50-day SMA (simple moving average) but is still above the 100-day and 200-day SMA. The stock has hit a lower low after a gap of six months and Miller Tabak’s Matt Maley sees that as a bearish indicator. He believes that the stock could test the 200-day SMA which is currently at $759.49.

From a fundamental perspective, TSLA stock trades at an NTM (next-12 months) price-to-sales multiple of 14.2x. No legacy automaker even comes close. As Tocqueville Asset Management portfolio manager John Petrides put it “Take a step back and ask yourself, if you didn’t own the stock today, would you buy it? And it’s hard to get on board from a fundamental standpoint.”

That said, while Tesla stock might appear a bit stretched based on valuations, especially in light of the expected tightening by the US Federal Reserve, it is still among the best EV stocks to buy.

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