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Market Insights

Tesla

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It’s been a tough start to the year for growth stocks. Peloton’s stock price has plunged. Paypal plummeted. But the big guns have held on. Apple dipped and then recovered quickly. Google’s Alphabet, Microsoft & Tesla all fell a little further, touching their respective 200 day moving averages before bouncing.

Here’s Tesla: Tesla 1 day trading movement 08 Feb

Tesla’s stock rallied 10% on the 31st of January. Into a nice technical area and (perhaps?) supported by a bullish note from Credit Suisse analyst Dan Levy:

“With the market disproportionately punishing growth stocks in the past month, we believe an attractive entry point has emerged for Tesla, and we upgrade to outperform from neutral,”

Always nice to be proven right immediately! The market took the cue. Fair to say he’s a Tesla fan:

“hard-pressed to find a stock that checks all the boxes as Tesla does – attractive growth story (both top-line and EPS), disruption, decarbonisation, etc.

“Accordingly, with robust fundamentals ahead and with the stock having been caught in the market decline, we believe the stock should recover. We upgrade to outperform and maintain our $US1025 target price.”

That’s another 10/11% higher from here…

Tesla motor 1 day enlarge chart 08 february

Still the debate about Tesla growing into its valuation continues. Can innovation keep propelling them higher while the others are catching up?

The hidden, boring side of things needs to be factored in. Tesla has been widely-criticised for poor service: Long wait times for repairs, courtesy car shortages and so on. 29,000 full time staff joined in 2021, and Tesla is nearing 100,000 full time workers.

President Biden finally acknowledged Tesla as the EV leader in the US, having notably refused on other such occasions. A petition signed by 58,000 Tesla supporters may have helped. Some speculated that Biden’s Tesla omissions were deliberate because unlike other automakers, Tesla has no employee union.

All of which adds to the impression that Tesla is becoming an established automaker. That’s a good thing for the company, but might not be so good for Tesla’s stock price. Especially with no new models expected to be released this year. By contrast, General Motors has vowed to launch thirty new EV models by 2025

Fundstrat analysts summed up Tesla’s situation superbly:

“The company’s innovation-first culture has resulted in making major strides in the technological race that will be difficult for peers to catch up to. They have done a lot of the groundwork in autonomous driving and we think they will continue to be a leading company in the area as demand for EVs continues to rise.

“It’s unclear who the ultimate winners in the developing competition to dominate EV and the future of mobility will be, but it’s hard to imagine a world where Tesla isn’t amongst them.“

While this sounds generally positive, those last two words hang ominously. “Amongst them”

That’s already a downgrade on the outright leadership Tesla has enjoyed over the past few years. At the time of writing, Tesla’s market value is just over $952 billion. Toyota is second with $277 billion & Volkswagen third with $128 billion. Can that kind of premium be justified to only be amongst the winners?

Not investment advice. Past performance does not guarantee or predict future performance.

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