Tesla cracks $US2000: Here’s what history says comes next
Tesla, one of the most popular Wall Street stocks held by Australians, has hit a new milestone and the road ahead looks attractive.
Tesla shares have cracked the $US2000 mark. It’s quite a number - $US2000 was Wedbush analyst Dan Ives’ best case scenario just weeks ago. His new best-case scenario is $US2500.
Gary Black, former Bernstein analyst and former chief executive of Aegon Asset Management and Janus Capital Group, also updated his valuation for Tesla. He is a Tesla bull. His new price target is $US2700.
Black is no longer a traditional analyst, but he has 7200 followers and he makes his estimates public. Aside from Black, bullish investors might still be anticipating Tesla stock being added to the S&P 500 and a share split to become effective. Tesla qualified for inclusion in the S&P 500 after reporting another quarterly profit for the second quarter of 2020. And the stock is splitting 5 for 1 at the end of August..
What’s next is anyone’s guess. New record highs — and 52-week highs — can often be a positive sign for traders. They can mean a stock has broken through resistance levels — when some traders take profits.
On the other hand, Tesla is more than 40 per cent above its 50-day moving average. The stock is overbought in Wall Street parlance. That can be a sign shares are due for a correction.
So hitting a record high argues for a continuation of the rally, while the overbought condition argues for a pause — or at least no big moves for a while. Not too helpful. But calling Tesla shares in 2020 has been hard.
The stock is up about 380 per cent year to date, crushing returns of the S&P 500 and Dow Jones Industrial Average over the same span.
Eventually the Tesla stock split and S&P 500 inclusion will be fully discounted in the Tesla stock price. Index funds have likely been doing what they can to build positions either with outright purchases or call options.
Down the road, the company’s battery-technology day in September will be the next big event for Tesla bulls and bears. Investors and analysts will want to hear about battery costs and durability. A battery that can last one million miles would be a win and costs that fall below $US100 per kilowatt-hour would be another win.
No one knows what is coming in September. But it has been a bad idea to bet against CEO Elon Musk in 2020.
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