Tesla Soars to Record High on Stock Market Day After Christmas; Analysts Remain Cautious

Dec 26, 2019
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Electric car maker Tesla Inc (NASDAQ:TSLA) has had a chequered past with production issues and delivery problems that have caused a lot of folks to bet against the company on the stock market. The company's C.E.O., Mr. Elon Musk has taken such individuals and entities to task publicly, with the executive stating that investors who expect Tesla to fail are misguided. Now, Mr. Musk's words might be bearing fruit on the stock market as his company is trading at a one-year (52-week) high a day after Christmas.

Tesla Trading at New 52-week High as Optimism from Company's Gigafactory 3 in Shanghai Rallies Stock at Year's End

Last week research notes from Credit Suisse and Oppenheimer guided investors on the banks' current beliefs about Tesla Inc's future. Tesla, which declared a positive earnings-per-share in its third fiscal quarter of 2019, has been busy this year streamlining production in China. The company has opened its third Gigafactory in Shanghai, and analysts have pegged its future with Tesla's ability to successfully streamline production from the plant.

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Channeling their optimism to Tesla's stock price, Credit Suisse analysts raised their 'Blue Sky' price target for Tesla to $400/share last Monday, and maintained a standard price target for the company at $200. The firm's halo of positivity around Tesla's fortunes demonstrated last week is also based on what it expects the company to reveal at the fabled Battery + Powertrain investor day expected to be held early next year. Tesla (NASDAQ:TSLA) is expected to share its plans and progress with core operational areas on the event. These include battery sourcing, production and the benefit of acquiring Maxwell Technologies; a San Diego-based company working on ultracapacitors.

 

Vehicles have been rolling off of the Gigafactory 3 to dealers this month; Tesmanian

Mirroring Credit Suisse's optimism in their investor presentation, analysts from Oppenheimer Holdings cautioned investors that Tesla's 360,000 vehicle production target from the Gigafactory 3 is contingent upon December's final weeks, and judging by the company's performance on the stock market, things seem to be going quite well in Shanghai.

At the time of writing, Tesla Inc (NASDAQ:TSLA) is trading at a share price of $431.35, marking a new one-year high. This is a boon for the company's investors and employees, who have seen the stock dip down to a record low of $176.99 in June this year. Tesla's $425.25 closing price on Tuesday outpaced the Standard and Poor's daily loss of 0.02% through a 1.44% gain. As we converse, the stock has gained as much as 1.62% over its previous close, and the company has outpaced the S&P 500 index this month.

Whether this momentum proves sustainable is another question. The stock's current rally might subside next year as investors look to profit from recent growth. Nevertheless, Tesla's recent growth should make future short-sellers think deeply before making their decisions, and it should not make the company's management any less vigilant as Tesla also has a fourth Gigafactory on its plate.

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Meadow where the Ggafactory 4 will be built in Brandenberg, Germany; Der Tagesspiegel

Morgan Stanley Believes Tesla is Overvalued as Bank Maintains $250 Price Target for the Company

Despite the stock breaking records, investment bank Morgan Stanley has cautioned investors that Tesla's current share price signals that the company is overvalued, and that the bank believes that Tesla will prove to be overvalued over the long-term. Retaining the bank's current price target of $250 for the company, analyst Adam Jones believes that Tesla (NASDAQ:TSLA) has a big year ahead, with several ''catalysts'' for potential growth.

These include Model Y sales, growth in China and technological breakthroughs. Owing to its stellar stock market performance, Tesla's current market capitalization sits above Ford and General Motors. However, the latter two have more capital available at hand than Tesla, and therefore, their Enterprise Value (Market Capitalization + Total Debt + Minority Interest - Cash & Short Term Investments) exceeds that of the electric car maker. Morgan Stanley, on the other hand, calculates Tesla as being more valuable than either Ford Motor Co (NYSE:F) or General Motors (NYSE:GM).

As per analyst Jones (via Seeking Alpha):

"the combined EV of Ford and GM (defined as market cap plus net industrial debt, excluding pensions) is less than $80 billion. By this definition, Tesla isn't just the most valuable U.S. auto company... it's worth materially more than GM and Ford COMBINED."

However, despite Morgan Stanley sticking with its $250 price target, Wedbush Securities has raised its target for Tesla by $100 to $370. Analyst Dan Ives cites an anticipated 45% - 65% increase in vehicle deliveries as the reason behind this bump, with Model 3 demand in the U.S. and the Gigafactory 3 being ahead of schedule expected to work in Tesla's favor.

Will Tesla's stock continue this growth? We'll find out once the new year settles in. Until then, stay tuned and let us know what you think in the comments section below. We'll keep you updated on the latest.

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