Is Tesla the New Rocket Ship from Musk?
Since the start of the year, the price has more than doubled. You can credit much of the increase to the seemingly boundless enthusiasm of Tesla’s supporters. But the haters appear to be playing a role, too. After betting that the company would fail, many seem to be cutting their losses and that is actually pushing the share price even higher.
But is that the only reason?
There are many complex reasons and the results are visible. In the fourth quarter, Tesla generated $1 Billion in cash even after capital expenditures, posting its second straight quarterly profit. With a new Shanghai factory producing vehicles in China and another under construction in Europe, the company is also poised for global expansion, they say. Although other manufacturers are beginning to introduce a strong selection of electric cars, they are responding quite slowly to the increasing interest of customers. Thus, Tesla has been able to effectively take advantage of this and has essentially secured a competition-free category.
For comparison, we can look at the planned increase in sales of Tesla’s direct competitors in the delivery of electric cars:
The world’s largest asset management fund, BlackRock with a $7 Trillion portfolio, investing heavily in fossil fuels, has announced last week that it may be shifting towards sustainable investments and “Tesla’s stock may be the new jewel in their crown”. BlackRock is already one of Tesla’s largest shareholders after increasing its holdings in Tesla to 5.37% last November. Moreover, ARK Investment announced their updated expected values of $7,000 per share for Tesla’s stock price in 2024 in their base case. The other two expected scenarios are: Bear Case @ $1,500 and Bull Case @ $15,000.
At these levels, Tesla enters uncharted areas and from now on the price action will move mostly by the fundamentals. The stock price has never stayed so long at such high levels of overbought, coupled with high trading volumes at the same time. However, it would be healthy to see a correction at least to the price between 30 and 70 levels of RSI.