$1,400 Is Likely Just a Stepping Stone for Tesla
InvestorPlace - Stock Market News, Stock Advice & Trading Tips The revolution in vehicle electrification is playing out as expected, so brace for the coming upside move in TSLA stock....
It’s the 800-pound gorilla in the room, as the old saying goes. You can try to pick and choose among electric vehicle (EV) investments, but there’s nothing bigger and badder than Tesla (NASDAQ:TSLA), and the TSLA stock longs have consistently outperformed the shorts.
Granted, there was a sharp dip in the Tesla share price in early November. However, the army of buyers are already mobilizing to rectify this completely unacceptable situation.
You could probably discern the mild tone of sarcasm and resignation in that last statement. Admittedly, I’ve had difficulty accepting the relentless rally in TSLA stock, due to its rather lofty valuation.
But hey, the trend is your friend, right? Besides, one prominent analyst recently issued a pretty good argument in favor of the bull thesis for Tesla — along with a price target that might raise some eyebrows.
A Closer Look at TSLA Stock
Speaking of raising eyebrows, how about that little correction we just had in TSLA stock? It really wasn’t too bad in the grand scheme of things. Just a year ago, the share price was sitting at $500 and now it’s in the quadruple digits.
Doubling one’s investment with TSLA stock is just par for the course, it seems. Returns of 2x, 3x or more are perfectly normal and expected, regardless of how high the stock has already gone.
This can be somewhat irritating to value-obsessed investors such as myself. Currently, Tesla’s trailing-12-month price-to-earnings ratio is a whopping 382.
That figure has been over 1,000 in the past, specifically in 2020 and early 2021. Still, a P/E ratio of 300-plus is hardly a bargain.
Yet, it is what it is. Tesla’s market capitalization easily surpassed the $1 trillion mark, the share price will undoubtedly return to its all-time high soon enough, and all will be right with the world again, I suppose.
TSLA Stock May Be a Bargain After All?
On second thought, perhaps there’s merit to the other side of the valuation argument. Could TSLA stock actually be a steal at the current price?
Let’s go back to that share-price dip we talked about. It’s surely not a coincidence that it happened after Tesla released its third-quarter 2021 financial results.
The data was fairly positive, overall. The experts on Wall Street were bracing for $1.67 per share in quarterly earnings, but Tesla’s actual non-GAAP result was $1.86 per share. On top of that, Tesla delivered roughly 241,000 vehicles during the third quarter. That’s around 10,000 to 15,000 more than what the analysts had expected.
TSLA stock probably dropped simply because people were expecting absolute perfection from the company, which, of course, isn’t realistic.
Apparently, the experts wanted Tesla to post $13.9 billion in sales. However, the actual result was very slightly under that mark, at $13.8 billion.
Sometimes being good just isn’t good enough for Wall Street.
A Revolution in Progress
Those quarterly results are perfectly fine, really. So, if you bought that quick dip in TSLA stock, you’ll probably do well.
Indeed, you’ll do outstandingly well if Wedbush analyst Dan Ives’ prediction turns out to be correct.
Ives just hiked his price target on TSLA stock in a big way, from $1,100 to $1,400. With that, Ives’s price target matches that of Jefferies analyst Philippe Houchois. So, evidently he’s not alone in his optimistic outlook.
Moreover, analysts from Wedbush declared that the EV “revolution” presents a $5 trillion market opportunity “over the next decade with Tesla leading the way.”
Ives cited the recently passed U.S. infrastructure bill as evidence that the revolution is already under way.
This event “kicks off the first phase of EV infrastructure (charging stations, tax credits) build-outs signaling a new era of adoption for electric vehicles in the US,” Ives wrote.
The Bottom Line
Betting against Tesla, as an investor or otherwise, will likely be a painful and unprofitable experience.
You don’t have to like Tesla’s P/E ratio or the company’s pole position in the EV market. But it’s wise to accept these realities rather than resist them.
Ready or not, the EV revolution is here and it’s not stopping — and neither will the long-term rally in TSLA stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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