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Tesla said it delivered more than 90,000 cars in the second quarter.
Photograph by Spencer Platt / Getty Images
Tesla‘s
The gains have pushed stocks as far as possible from the Wall Street average price. That could be a risk for bullish investors.
Tesla (ticker: TSLA) shares gained about 40% in the past month, and rose nearly 10% on Monday afternoon to $ 1,327.72. JMP Securities analyst Joe Osha was the latest catalyst, raising its price target to $ 1,500 a share from $ 1,000, after Tesla reported that delivery numbers for the second quarter of last week were much better than the expected. Rate Tesla’s shares as equivalent to Buy.
Tesla said it delivered more than 90,000 cars, compared to a top Wall Street estimate of 86,000, according to FactSet.
The question for investors now is how high can Tesla shares go?
Tesla is difficult to value with traditional valuation metrics. Stocks are trading at roughly 100 times the estimated earnings for 2021, much higher than most auto companies, which often trade for a single digit price / earnings ratio. But Tesla is growing much faster than its peers.
That comparison is not the only difficult one. Tesla’s profit estimates also vary enormously. Street earnings estimates for 2021, for example, have gone from about $ 9 a share to $ 15 a share and back to about $ 11 a share over the past year. That wreaks havoc on projected PE ratios.
One way to choose entry points for Tesla stocks is with analyst pricing targets, adjusted to the reality of Tesla trading, of course. Barron’s He wrote on March 20 that it was one of the best times to buy Tesla stock because Tesla was trading below its average analyst price. That doesn’t usually happen with actions.
Tesla’s average price target was around $ 500 and the shares traded for about $ 425. Today, the average price target is around $ 730, according to Bloomberg, about 40% below where the stock is trading. Tesla stocks are generally trading above the average analyst price targets, but they are rarely that high. As in March, July is becoming an outlier.
This does not mean selling the shares. It means stepping lightly.
Essentially, three things can happen from here, as they relate to the target price narrative. Analysts can increase their targets. Three did so on Monday: Osha, Emmanuel Rosner of Deutsche Bank and Ryan Brinkman of JP Morgan. That may close the gap, making this analysis debatable. Tesla shares could return some of its earnings, making it a decent business option. Finally, Tesla shares can continue to trade where they are. There is no rule that stocks have to be tied to analyst target prices.
The third action is slightly more likely due to the recent trading of electric vehicle stocks in general, which have been enjoying huge gains. Shares of Chinese electric vehicle maker NIO (NIO), for example, rose approximately 68% in the past month. Shares of electric vehicle trading company Workhorse (WKHS) rose 555%.
Both stocks are also trading well above the average price targets.
The Tesla stock, meanwhile, is working well. Shares to date have risen nearly 200%, much better than the comparable earnings of the S&P 500, the Dow Jones Industrial Average and its automotive peers.
Tesla’s recent earnings have made it the most valuable automotive company in the world, based on market capitalization.
Write to Al Root at [email protected]
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