Making Sense of What May Be a Tesla Bubble
Analysts are running to keep up with Wall Street’s biggest juggernaut
Under Analysis is a Marker column where experts and analysts weigh in on a prominent company’s future prospects. Today, we look at Tesla’s incredible stock rally.
Tesla shares surged 13% today after rising 19% yesterday. They are up 3.8 times since their low last May, have more than doubled this year, and are already up 36% this month. Tesla’s $170 billion market cap is almost GM’s, Ford’s and VW’s combined.
Except that Tesla produced 367,500 vehicles last year, while VW alone sold about 11 million. For analysts, this is whiplash just a year after much of Wall Street seemed certain the company was on a death march, led by a string of public foibles by CEO Elon Musk, who himself forecast bankruptcy right about now, short of transformational changes.
Analysts have been scrambling to keep up with Tesla’s run. Yesterday, Argus raised its target price to $808 a share, the highest on Wall Street; only a month ago, Argus had raised its target to $556. Last Friday, another bull — ARK Invest — put a whopping $7,000 target on Tesla shares by 2024.
A couple of analysts are coming right out with what many probably want to say: “This is a LIQUIDITY BUBBLE thanks to ‘funny money’ from central banks,” tweeted Jesse Colombo, who comments on the economy at Zero Hedge. In a tweet, Citron Research called Tesla “the new Wall St. Casino.” “Even Elon would short the stock here if he was a fund manager,” Citron said.
Tesla did not respond to an email asking whether the shares are in a bubble.
The reasonable outlook is that it’s both possible for Tesla to be an electric car juggernaut, as we reported last month, and for its shares to be in a massive bubble. Dan Ives, an analyst at Wedbush who is neutral on Tesla, told me in an email exchange that he expects Tesla shares eventually to plunge to $710. Before that, however, he is looking for the bull run to take them over $1,000. They closed at $887.06 today.
In a note to clients today, Ives said Tesla’s outlook had fundamentally changed over the last week. He cited three factors: the…