In the first week of 2021, Tesla was once again among the best performers of the S&P 500, rising 24.7%, just 1 percentage point behind market leader L Brands (LB). The week’s revenue, in addition to the success of Tesla last year, was sufficient to make CEO Elon Musk the richest individual in the world, and its stock surpassed Facebook (FB) into the five most precious stock in the US.
If the rate of increase persists for the first week, Tesla’s stock will have exceeded all last year’s earnings by mid-March. Not everybody expects another 700% development in shares this year. Or perhaps a tenth of that.
Indeed, even some of the most bullish analysts expect that Tesla’s share will reach $1,000 by the end of the year, a 14% increase for the rest of 2021 from Friday’s record high close.
A few analysts with reasonably optimistic views for the stock have 12-month price targets far below Friday’s close of $880. The latest average target price for analysts is $440, which would reflect a 50% decline in shares.
Morgan Stanley’s Adam Jonas is a bullish analyst with a bearish price goal. Considered one of Wall Street’s top auto analysts, Jonas upgraded Tesla’s rating to “overweight” at the end of November, but struggled to keep raising its price target ahead of the market price.
On November 18, when the stock was upgraded, he set a target price of $540, which was a 22% increase from where the shares stood at that point. He moved it up to $810 last Wednesday, only to see Tesla’s shares blast past that mark quickly.
What makes it so hard to forecast Tesla’s shares is whether investors are not valued on the basis of what the company is doing now. If they were, a business with just 500,000 car sales last year would hardly be worth more than the total valuation of the world’s 10 most valuable car manufacturers, which together account for the overwhelming majority of the world’s almost 75 million annual car sales.
Instead, they bet on Tesla’s ability to continue to expand quickly and catch a significant part of the world’s increasing demand for electric cars or electric vehicles. Forecasts predict that in 10 to 20 years, Tesla could become the world’s No. 1 car manufacturer, not just of only electric cars.
Dan Ives, a tech analyst at Wedbush Securities, has a base case target price of $715 for Tesla shares and a bull case target of $1,000. His investing recommendation for Tesla is based on his expectation that Tesla will continue to have a successful time. He assumed that by 2022, 1 million vehicles would be manufactured per year. And travel north of 3-4 million, with 40% of that growth coming from China in 2025 – 2026.
The existing market leader, Volkswagen, sold 11 million vehicles in 2019.
Of course, that’s just guessing. However, Tesla’s stock has consistently proved the wrong analysts over the last 15 months.