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Is Tesla Heading To $1,000?

Tesla Stock

Tesla’s stock has surged over 125% in the last month and a half, now chasing Toyota as the world’s most valuable carmaker, with some analysts predicting that the stock could skyrocket in the coming few years to wild levels--some of them even five digits.  Tesla’s stock was trading near $400 at the beginning of the year, but as of Monday, the closing price hit an all-time high of $786. Tuesday, Tesla shares topped $900. In all, over the last 10 years, the stock price has soared a whopping 3,300%. 

Earlier this year, Tesla became the first American automaker to hit a $100 billion market cap. But it blew by that metric, too, and it’s now grown to $165 billion--almost twice the combined size of rival automakers General Motors and Ford.

Right now, Tesla is only $30 billion behind market leader Toyota--which sold nearly 11 million cars last year, compared to 367,500 for Tesla.

So, what’s caused this massive rally? 

For starters, in December, Tesla delivered the first cars produced by its Chinese Gigafactory in Shanghai, enabling one of the largest auto markets to have locally produced cars at reduced prices. 

But then, last week, the Chinese government ordered the shutdown of the factory in Shanghai over coronavirus fears. Tesla stock, however, continued to surge ahead in surprise defiance of the viru

The rally was highlighted by Tesla's last year’s fourth-quarter results reported last week, where it announced a first-ever quarterly profit of $105 million. The results were viewed as a milestone for the company competing against established major companies.

Early on Tuesday, Tesla investor Ron Baron told CNBC he thought Tesla could hit $1 trillion in revenue in the next decade.

Also, the rise came after Panasonic Corp reported the first quarterly profit in its American battery business with Tesla, which followed years of production troubles and delays. 

“We are catching up as Tesla is quickly expanding production… Higher production volume is helping to push down materials costs and erase losses,” Panasonic Chief Financial Officer Hirokazu Umeda said during an earnings call. 

Falling battery prices means lower costs, and thus higher margins, for Tesla. 

Related: The Most Exciting Oil Plays Of 2020

Some firms, such as ARK Invest, believe that Tesla is still undervalued, reportedly targeting the automaker's true pricing at $7,000 by 2024, based on optimism about its gross margins and capital efficiency.

And that’s just ARK’s base case. It’s bull case has Tesla trading at $15,000, with a market cap of $2.7 trillion. Even ARK’s bear case puts the stock at $1,500. 

“Based on this probability matrix, our bear case implies that Tesla will sell 3.2 million vehicles in 2024,  cutting its share of total EV sales roughly in half compared to today’s levels. Our bull case implies that Tesla will maintain its roughly 18% market share, and that a substantial percentage of its fleet will generate high-margin robotaxi platform fees,” the investment team wrote. 

Other analysts, however, are decidedly more cautious. 

Roth Capital Partners analyst Craig Irwin late last week said he felt Tesla’s stock was “significantly overvalued” when it was still trading at the $581 per-share level. 

He cited risks including the potential for delays in manufacturing, ramping production at its Shanghai Gigafactory and cost escalation as it tries to meet its volume targets.

Morgan Stanley analyst Adam Jonas is sticking tightly to his $360 price target, telling investors that it is “predicated on Tesla achieving 2 million units of sales by 2030 with a 15% EBITDA margin”.

By Tom Kool for Safehaven.com

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