Will Tesla’s stock fly higher?

Will Tesla’s stock fly higher?

2020-06-12 • Updated

Let’s just face it – everything Elon Musk does at some point goes to space. At first, SpaceX launched the Cargo Dragon Spacecraft at the end of May, becoming the first commercial company to join NASA’s space program. Secondly, the price of a stock of his car-producing company, Tesla, surged above the 1,000 mark for the first time in history on Wednesday. Despite that, Goldman Sachs and Morgan Stanley, the big analytical companies, downgraded Tesla’s stock this week. What are their reasons and why we may not see the further rise of the company’s equity, according to analysts? Let’s answer these questions.

Overhyped

This week, the market capitalization of Tesla has risen to more than $190 billion. It has almost reached Toyota’s $210.5 level despite the difference in levels of production of both companies. While Tesla reported 103 thousand vehicles produced in the first quarter, Toyota made 2.4 million. Still, the luxurious car-maker keeps getting a lot of investors’ attention. On Wednesday, Elon Musk, the CEO of the company, sent an e-mail to the employees saying the new Semi-trucks are ready for volume production. Earlier, Tesla postponed the process to 2021. This was a natural reaction to the news about Nikola, the new maker of battery-electric trucks, which was recently listed on the US stock exchange. Musk also revealed a new "million-mile" battery that could lower the costs of the vehicles. Also, the increase in consumer demand for Tesla’s vehicles is very high and growing at a fast pace.

What we’ve learned about Tesla's CEO Elon Musk, is that he is very good at focusing the attention of investors on the long-term goals. At the same time, the current risks such as the US-China trade tensions and coronavirus pandemic may interrupt the stock’s further surge. 

Opinions

While even Mr. Musk sees Tesla's stock too overpriced, tweeting "stonks” as a reaction to $1,000, the senior analysts are switching their forecasts.

Goldman Sachs mentions the cuts in prices and the problems with the output of Model Y. The analysts expect a drop in global auto sales by 14.5% this year and Tesla’s stock at $950.

Morgan Stanley expresses similar views, cutting Tesla’s outlook to underweight from equal-weight. The bank sees the vehicle market getting weaker amid the pandemic. Also, analysts pointed out escalating trade tension between China and the United States. Morgan Stanley's price target for Tesla is set at $650 level for this year. This is almost a 33% decline from the current tops. Analysts also highlighted Amazon's plans on buying driverless startup Zoox. If that happens, Tesla will get yet another competitor.  

Technical outlook

On Friday, June 12, the price of Tesla’s stock has been moving down towards $870 (23.6 Fibo level). The next obstacle for bears will lie at $800 and $767 (38.2 Fibo). The strength of the level is also confirmed by the 50-day SMA. The stochastic oscillator left the overbought zone and has been moving down. On the upside, we will continue following the $1,025 level.

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