Tesla Inc. (NASDAQ:TSLA) is a California-based EV and clean energy company founded by Martin Eberhard and Marc Tarpenning, currently led by Elon Musk.
The company designs and manufactures electric cars, battery energy storage, solar panels and roof tiles, and related products and services. It is one of the largest suppliers of battery energy storage systems in the world.
As such a prominent player in the race for a green future, TSLA stock has been touted as a growth investment of a lifetime. Indeed, those who bought Tesla stock just a couple years ago have seen the effect investor sentiment in this sector can have on a given company's stock price.
However, despite recently breaching the $800 level, TSLA stock has seen some significant volatility in recent months. Many investors may rightly question if TSLA stock can move to all-time highs from here.
Let's dive into why I'm slightly bearish on this stock, and why I think investors should take caution with Tesla right now. (See Insiders’ Hot Stocks on TipRanks)
TSLA Stock: Forming a Top?
Looking at Tesla's stock charts over the past month, investors may note that the trend is broadly bullish. This stock has been moving up in recent weeks in a stair-step-like fashion, and has knocked on the $800 door a few times (and successfully broken through).
However, this is a stock that's also been overly volatile, given the various catalysts that have taken the market down in recent weeks. As investors contemplated the potential for higher interest rates, and a debt ceiling fiasco took place, TSLA stock moved lower than the market on a number of occasions.
Such moves are typical for Tesla. Indeed, Tesla is a high-beta stock, meaning it moves higher or lower than the stock market on a given day. This heightened volatility has worked out great during this extremely long bull market. However, should momentum turn around, investors may be in for a rude surprise.
Accordingly, investors who are cautiously viewing the next year with potential for either a market breakout, or a serious correction, may want to consider how Tesla's potential volatility will fare in such an environment. This is a stock that's got a lot going for it, but it's also among the most risky in the market right now, for various reasons.
The Cathie Effect
One of Cathie Wood's core holdings in her various ARK ETFs, Tesla remains a core holding of many long-term growth investors. According to Wood, this is a stock with the potential to hit $3,000 per share by 2025.
That kind of an enormous price target raises eyebrows. After all, Tesla's current valuation is already astronomical, in the minds of most fundamentally conscious investors.
However, Wood's view that Tesla could continue to maintain, or grow, its share of the global EV market has driven this valuation. The increased ramp-up of EV adoption worldwide is indeed bullish for Tesla. As the global leader in this regard, there's a lot to like about this stock.
Musk reportedly emailed his employees that he agrees with Cathy’s outlook. He further stated that he expects Tesla to sell 5 million to 10 million vehicles every year by 2025, if Tesla is able to execute its strategies well.
Additionally, according to Tesla watcher Electrek, Tesla is also testing its Full Self-Driving autonomous car software, version FSD Beta 10, among participants in the company’s early access program.
Tesla also plans to bring a single button to download and activate the FSD Beta package that will include Navigate on Autopilot, parking feature Summon, and other exclusive standalone features.
Wall Street's Take
As per TipRanks' analyst rating consensus, Tesla is a Hold. Out of 26 analyst ratings, there are 12 Buy recommendations, seven Hold recommendations, and seven Sell recommendations.
The average Tesla price target is $691.71. Analyst price targets range from a high of $1,200 per share, to a low of $150 per share.
Bottom Line
There's certainly reason many investors remain bullish on TSLA stock. This is a company that's revolutionized the EV space, and led the way in many regards on this front.
However, from a valuation and execution standpoint, a lot remains to be seen with Tesla. How this company continues to accelerate its growth from here will really dictate how TSLA stock performs.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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