The article was written byMotek MoyenResearchSeeking Alpha’s #1 Writer on Long Ideas and #2 in Technology– Senior Analyst atI Know First.
TSLA Stock Prediction
Summary:
- Based on the analysis of technical indicators and moving averages, TSLA has the upward momentum to hit $400 before this year ends.
- In spite of Toyota unloading all its Tesla shares, the Artificial Intelligence-powered algorithmic forecasts of I Know First are still very favorable for TSLA.
- Toyota simply decided to take profit and sell its 2.34 million TSLA shares. Further, Toyota now sees Tesla as a rival, not a partner.
- Other event-driven catalysts will also propel TSLA to $400. Musk confirmed that the Model 3 prototype is on track for production next month.
- Tesla also plans to unveil its Model Y semi-truck electric vehicle this coming September. The Model Y is scheduled for commercial release in 2019.
I am reiterating the Buy recommendation I made for Tesla (TSLA) last August. TSLA has returned more than 59% since August 2016, but I’m convinced that it still has enough upward momentum to breach $400 before 2017 ends. My projection is realistic – it is lower than Pacific Crest’s $439 price target for TSLA.
I agree with Pacific Crest’s argument that the upcoming release of the budget-friendly Model 3 is a major catalyst for Tesla’s stock. Elon Musk himself confirmed that production of the Model 3 prototype will start next month. By delivering a retail version of the budget-friendly Model 3 before 2018 ends, Tesla’s stock will continue to outperform Ford (F), General Motors (GM), and Toyota (TM).
(Source: Google Finance)
The outstanding return of TSLA is in spite of Toyota’s recent revelation that it has sold all of its TSLA shares. Toyota used to have as much as 2.34 million shares of Tesla. Toyota now sees Tesla as a threat to its own business. Tesla selling sub-$40k cars will definitely hurt Toyota’s own ambition to become a major electric car vendor.
Betting Big On The Future Profitability Of Tesla
The bulls who are pushing TSLA up (since March) know that a sub-$40,000 electric car can help double-up Tesla’s revenue. The $70k Tesla Model S was the world’s top-selling electric vehicle [EV] last year, beating the much more affordable Nissan Leaf.
(Source: cleantechnica.com)
Tesla is now the gold standard for EVs. It has the same coveted luxury brand power of a BMW or a Porsche. Selling a $37k Model 3 will encourage more people to choose it over the Nissan Leaf or Chevy Bolt. Going forward, Tesla could dominate both the luxury and economy market for electric vehicles. Selling 60k Model S and 120k Model 3 units can indeed double-up Tesla’s 2016 revenue of $7 billion.
The high valuation of TSLA is due to the potential revenue from the mass-market appeal of the Model 3. The attractiveness of Tesla is due to its transformation from an elitist niche luxury car vendor in to a true consumer-centric company.
(Source: Graphic News)
Tesla is a momo ticker that relies on impressive revenue growth rate to attract investors. Since 2012, Tesla has achieved double-digit annual revenue growth. TSLA’s performance largely depends on how fast the company can grow its annual sales.
Source: finbox.io
There’s also the future contribution of the Model Y semi-truck electric vehicle. Musk again promised to unveil the semi-truck Model Y in September. Its tentative commercial launch date is 2019. Tesla will manufacture the Model Y using a new platform and a new factory in another location. Musk expects even bigger demand for the Model Y than the Model 3.
The Model 3 and Model Y could realize Musk’s promise to sell 500,000 cars every year starting 2019. At an average selling price of $40k, 500k car sales/year comes to $20 billion in annual revenue for Tesla. This guesstimate should already be enough to support my $400 price target for TSLA.
However, analysis of monthly technical indicators and moving averages also point out that TSLA still has a great chance to shoot up higher. You do not need to be an expert in technical trading to understand the chart below. The buy trading signals from the exponential and simple moving averages of Tesla are already enough reasons to go long.
(Source: Investing.com)
The market comparative algorithm of Alpha Omega Mathematica also highlights just how strong TSLA’s upward momentum for the last 200 days. Compared to its sector (Consumer Goods) and industry (Auto Manufacturers) peers, TSLA’s momentum factors are very strong.
(Source: getaom.com)
It also helps that Tencent (TCEHY) bought a 5% stake in Tesla last March. Tencent’s backing will greatly help Tesla’s future prosperity in China.
Final Thoughts
I am highly confident that TSLA will hit $400 by end of 2017. It is not yet too late to go long Tesla. The bullish sentiment is like a tidal wave that is overwhelming the sell-side faction. The only thing that could derail TSLA’s trajectory toward my $400 price target is if insiders and institutional holders do profit-taking en masse. Tesla’s float is 62% owned by institutional investors, 22% by insiders/founders like Elon Musk.
My bull case for Tesla is again backed by the positive near and long-term algorithmic forecasts from I Know First. With the 1-month, 3-months, and one-year market trend scores all above 50, there is very low probability that TSLA will suffer a serious and lingering pullback.
I Know First Algorithm HeatmapExplanation
The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.
Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.
Past I Know First Success With TSLA
I Know First has been maintaining its bullish forecast of TSLA, such as its bullish article published on January 8th, 2017. The article talks about Tesla’s struggle in the year 2016 and what’s to come in 2017 and beyond. The release of its new car (the model 3) and how it will be more affordable for the average consumer. In the last year, TSLA shares are up 64.23%.
This bullish forecast for TSLA was sent to I Know First subscribers onJanuary 8th, 2017. To subscribe today click here.
