While the technical charts are indication another $100 rally from the current rally some analysts have asked investors to maintain cuation and think that the company is highly overvalued at this stage.
Tesla’s stock price surge has been unfathomable and unprecedented so far in 2020. Tesla Inc (NASDAQ: TSLA) stock has surged over 600% year-to-date and the rally seems to be stopping nowhere. TSLA stock continued its rally soon after Tesla announced its plans to raise $5 billion by selling more shares, earlier this week.
As of Thursday’s closing, TSLA stock was trading at $627 with a market cap of $594 billion. But technical indicators suggest that the TSLA rally won’t cool-off easily and there’s still some steam left. As reported by Business Insider, TSLA stock is headed for a breakout of $716.
Fairlead Strategies founder Katie Stockton noted that as Tesla is a momentum stock, technicals suggest for a rally ahead. She added:
“The ratio [momentum stocks versus S&P 500] has room to resistance, supporting additional near-term outperformance by MTUM’s holdings, the largest of which is Tesla”. If momentum stocks touch new highs, they should “foster positive momentum [for Tesla] with a targeted level of $716 from the breakout”.
It has been a crazy wild ride for Tesla investors this year. Tesla’s upcoming entry to the S&P 500 has fueled more optimism among investors in recent times. While the Tesla stock rally doesn’t seem to be stopping anywhere, analysts are asking investors to maintain caution.
JPMorgan: Tesla (TSLA) Stock ‘Dramatically Overvalued’
At the current price, Tesla (TSLA) stock is trading at 1,325 times its long-term PE multiple. Also, it is trading at 291 times its 2020 estimate. While TSLA stock trades at 1,200 times trailing earnings, other established players trade at eight times or less.
Currently, at $600 billion valuations, Tesla is ten times the size of General Motors Company (NYSE: GM). In a note to investors, JPMorgan analysts wrote:
“We recommend investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are in our view and by virtually every conventional metric not only overvalued, but dramatically so.”
Back in May 2020, Tesla CEO Elon Musk himself said that he feels that the stock price is very high and Tesla is overvalued. Since May, TSLA continues to surge and has multiple 4x so far. Following Tesla’s recent move to fundraising, another electric car maker Nio Inc (NYSE: NIO) plans to sell 69 million shares in the open market.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
