TSLA Stock Price Rises 5% – Time to Buy Tesla Stock?

Tesla (TSLA) stock rose 5.2% yesterday and was trading higher in US premarket price action today also. The stock is however down 7% for the year. Is it time to buy Tesla stock now?

TSLA stock is still down over 27% from its 52-week highs. The stock had fallen sharply after hitting the all-time high amid the sell-off in growth names.

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Tesla stock technical analysis

Tesla is looking quite bullish on the charts. The stock has found strong support at the 200-day SMA (simple moving average) while 50-day SMA has been a resistance. However, amid the recent rally, it has crossed above the 50-day SMA also which is a bullish technical indicator. The stock has also risen above the short-term moving averages including the 10-day and 30-day SMA which signals a short-term uptrend. The next resistance for TSLA stock could be the 100-day SMA which is currently at $678.26. However, the stock is getting near overbought levels with a 14-day RSI (relative strength index) of 61.5.

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Tesla stock forecast

Tesla has a median target price of $725 according to the estimates compiled by CNN Business. The target price implies an upside of 10.4% over the next 12 months. However, there is a wide dispersion in analysts’ target prices and Tesla’s highest and lowest target prices are $1,471 and $67 respectively. It is quite unusual for any stock to have such dispersion in target prices. But Tesla being Tesla, analysts either love or hate the stock.

Cathie Wood

Cathie Wood of ARK Invest is among the biggest bulls on Tesla stock. ARK Invest has assigned a target price of $3,000 to the Elon Musk-run company. While Wood sold some Tesla shares earlier this year and instead bought Coinbase, she bought the dip in Tesla shares in May. Tesla remains the top holding for ARK’s flagship ARK Innovation ETF.

Gene Munster sees Tesla stock tripling from these levels

Gene Munster of Loup Ventures is another Tesla bull and has forecast the shares to hit $2,500 by 2023. Munster had correctly predicted Apple’s market capitalization hitting $2 trillion and is now forecasting the iPhone maker to hit a market cap of $3 trillion. However, while he had predicted that Apple will be the best performing FAANG stock in 2021, it is actually the second-worst performing FAANG stock so far. Alphabet, which underperformed the FAANG peers as well as the Nasdaq in 2020, is the best performing FAANG stock in 2021.

Canaccord Genuity slashed its target price

Earlier this month, Canaccord Genuity lowered its target price on TSLA stock from $974 to $812 citing concerns over the battery program. “Leading up to the delayed launch, Tesla cancelled the top trim Model S Plaid Plus, which was reportedly going to be the first to feature the new 4680 cell design. This signals to us the new cell format isn’t ready for production just yet, and cell production capacity constraints for energy storage products like Powerwall remain,” said Canaccord analyst Jed Dorsheimer.

Tesla Model S Plaid

Earlier this month, Tesla unveiled its Model S Plaid model. The company did not produce any of the Model S sedans in the first quarter as it was revamping the model. The model S is Tesla’s flagship premium sedan. The competition is heating up in the premium electric car market with the entry of Mercedes EQS and the upcoming Lucid Air. Lucid Motors is going public through a merger with Churchill Capital IV (CCIV). The SPAC (special purpose acquisition company) merger is expected to complete next month.

Tesla Model S Plaid plus would have competed with Lucid Air. However, Musk canceled the model at the last moment as he found the Plaid model to be good enough. The Model S Plaid+ model was expected to have a range of 520 miles while the Plaid model has a driving range of 390 miles. A higher driving range helps address the range anxiety. Meanwhile, with its ever-growing network of Superchargers, Tesla has been able to somewhat address the range anxiety issue.

Tesla stock valuation

Valuing Tesla has been a conundrum for analysts and it also explains the divergence in analyst opinion. Tesla stock has a market capitalization of $630 billion which is over twice that of Toyota, the second most valuable automaker. At its peak, Tesla’s market cap exceeded that of all leading automakers including Toyota, Volkswagen, General Motors, and Ford put together.

To be sure, it is not possible to justify an automaker commanding a market capitalization of more than $600 billion considering that Tesla sold only about half a million cars in 2020 which is a fraction of what Toyota sold in the year.

TSLA stock bullish view

However, the bullish narrative for TSLA stock is stretched way beyond its automotive business. Tesla is a play on the renewable energy theme, given its solar and energy storage operations. While the energy business currently accounts for less than 10% of the total revenues, Musk expects the business to eventually become as large as the automotive business.

Tesla’s electric car business is also booming and it expects deliveries to rise 50% annually for the next many years. The company is launching several new models including the Cybertruck which will be pitched against Ford’s F-150 and General Motors’ Silverado. The F-150 has been the best-selling pick-up for decades in North America and its recently unveiled all-electric version will be a tough competitor for the Cybertruck.

Tesla’s software capabilities

Meanwhile, the bulk of Tesla’s valuation comes from the software part of the business which even rivals like Volkswagen have appreciated. The company’s autonomous driving and other future services like robotaxis could drive the real value for TSLA stock. These are high-margin businesses and most of the revenues from autonomous driving will flow to Tesla’s gross profits. While the FSD (full-self driving) option currently costs $10,000, Musk expects the price to rise to $100,000 eventually.

TSLA stock valuation

TSLA stock trades at an NTM (next-12 months) EV (enterprise value)-to-sales multiple of 11.7x while legacy automakers trade at a multiple of around 1x. However, the company should not be valued as a legacy automaker given its software capabilities. Meanwhile, TSLA could still appear overvalued even after accounting for future growth.

That said, the stock is looking bullish on the charts and there is strong momentum in electric vehicle stocks that could support a rally in TSLA stock in the near term.

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