Tesla Stock Price Up 7% – Time to Buy TSLA Stock?

Tesla (NYSE: TSLA) stock is trading 7% higher in early price action today. The stock looks set to continue its momentum from 2021 where it gained 50% which was almost twice what the S&P 500 delivered.

While Tesla stock came off its 2021 highs after its CEO Elon Musk sold billions of dollars worth of shares after a Twitter poll, it was the best performing major EV (electric vehicle) stocks of 2021. Tesla’s strong 2021 performance was preceded by 740% gains in 2020 as well. TSLA has become the first automaker ever to command a market cap of $1 trillion. What’s the 2022 forecast for the stock and can it continue its good run?

Tesla stock recent developments

Tesla has released its fourth-quarter delivery and production report. While Chinese EV companies report their production on a monthly basis, Tesla releases them quarterly. In the fourth quarter of 2021, Tesla produced 305,840 electric cars which took its total 2021 production to 930,422. The company delivered 936,172 electric cars in the year which is 87% higher than 2020. 2021 was a good year for Tesla and its deliveries were higher than expected in all four quarters. While the company hadn’t provided quantitative guidance it said that 2021 deliveries are expected to be much above the long-term CAGR of 50% that it is targeting.

Only about 3% of TSLA’s 2021 deliveries were from the higher-priced Model S/X. This is partly because of the fact that it did not produce any of these in the first quarter due to the model revamp. Secondly, gradually the mass-market Model 3/Y has started to account for the bulk of the company’s deliveries. While markets feared that the higher percentage of low-priced models would dent the company’s profit margins, the cost efficiencies and economies of scale have more than offset that.

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Even TSLA bears have looked impressed

Wall Street is quite divided on TSLA stock. That said, the company’s strong execution has even the most pessimistic of analysts take note of. Incidentally, even as the global automotive industry lost millions of units of production in 2021 due to supply chain issues, it looked like business as usual for Tesla. The company did however delay the delivery timeline for its pickup model Cybertruck, which would compete with the all-electric version of the F-150.

Tesla stock forecast

The strong delivery report from Tesla is an encouraging development for bulls. The stock has come off its highs and the bullish report would help in improving the market sentiments. Meanwhile, Tesla is arguably the most polarizing companies and it also reflects in its ratings. Of the 27 analysts polled by TipRanks, 14 rate the stock as a buy while five rate it as a sell. The remaining eight analysts have a hold rating. Its average target price is $1,030, which is similar to the current stock price. However, there is a wide dispersion in the stock’s target prices and they range between $295-$1,580. It is hard to think of any other stock with such dispersion in analysts’ target price.

TSLA stock target price

Cathie Wood of ARK Invest has a base case 2025 target price of $3,000 on TSLA. The stock is the largest holding of her ARK Innovation ETF. Gene Munster is another Tesla bull who expects the stock’s market cap to hit $2 trillion by 2023. Munster had correctly predicted Apple’s market cap hitting $2 trillion and the iPhone maker’s market cap is now almost $3 trillion as he had forecast.

Analysts turn bullish

Wall Street analysts have been gradually raising Tesla’s target price. Last month, Deutsche Bank reiterated the stock as a buy and said that no other company comes closer to it in the EV race. The brokerage has issued another bullish note after the company’s delivery report.

“While we maintain for now our 2022 deliveries estimate of 1.47mn units, 4Q production suggests upside potential to our forecast. Our 2022 deliveries represent 58% YoY growth, which should be supported by the new Berlin and Austin factories, as well as capacity expansion in existing factories,” said Deutsche Bank analyst Emmanuel Rosner.

Here it is worth noting that it is not certain whether Austin and Berlin plants contributed to the company’s record fourth-quarter deliveries. “We continue to believe 2022 could be a pivotal year for Tesla’s future growth and profitability with ramp up of new Berlin and Austin plants, start of new vehicles, initial in-house production of 4680 battery cells, and likely broader rollout of [full self driving] software,” said Rosner who has a $1,200 target price on the stock.

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.

The energy business, which has a single-digit contribution to Tesla’s total revenues is also expected to contribute significantly in the coming years and Musk has forecast that the business would be comparable to the automotive business in terms of size.

Should you buy Tesla stock?

Tesla is at the forefront of the global pivot towards electric cars. The stock trades at an NTM (next-12 months) enterprise value-to-sales multiple of 15.5x. But then, growth names like Tesla shouldn’t be analyzed based on near-term earnings. The company has proven its mettle against both legacy automakers and pure-play EV companies, a lot of which are commanding massive valuations only because markets see them as the next Tesla.

TSLA stock is also looking bullish on the charts and looks set to cross above the 50-day SMA (simple moving average) in today’s price action. If you are looking to play the global pivot towards electric cars, Tesla is one stock that should be on your watchlist.

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