Following Tesla (NASDAQ: TSLA) shares has treated us to a lot of ups and downs. Just seeing how the stock can spike, subside and spike again is enough to make almost any observer wonder just how volatile this stock can really get. Tesla stock took one major swing upward today, gaining 7% in premarket trading after another major call effort hit and sending the stock back over the $900 per share mark.
A Reaction to Fundamentals? Conditions? Or Massive Speculation?
One of the biggest new pushes for Tesla lately came earlier today, when Piper Sandler bumped up its price target on Tesla, going from $729 a share to a substantially higher target of $928 per share. The move was more than enough to send Tesla share prices rushing to meet the target, as said shares sit at $914.52 a share as of this writing, a move that will delight investors as reports note that $928 is now the highest price target Wall Street has. If Tesla shares were to hit that point, reports note, it wouldn't even represent a 52-week high for the shares, which currently sits at $968.99.
Piper Sandler's upgrade on Tesla stock came amid new reports of Tesla planning to drive into new areas related to clean energy, a point it's already been wonderfully pursuing with developments like the Powerwall battery system.
Behold the Power of Consensus
It's not just Piper Sandler that's been lending a hand to Tesla's upward climb. Just a couple weeks ago, Argus Research brought out a hiked price target that sent the stock price up a hefty 19%. A day afterward, Ron Baron brought out some truly optimistic hopes for Tesla's revenue profile, looking for it to clear the trillion-dollar mark before the ball dropped on 2030. That meant a 13% boost to Tesla's stock.
That's scarcely the beginning; just yesterday we found Morgan Stanley issuing a new bull case on Tesla that nearly doubled the previous bull case. With the recent gains, it looks downright possible that the optimistic picture may come to pass, despite Morgan Stanley not modifying its overall rating of “underweight”, suggesting price declines are likely to come at some point.
Yet the consensus may work just as hard in the other direction at some point. Analysts with ratings like Morgan Stanley's are building a coalition of their own. There are 31 analysts covering Tesla right now, notes a report from FactSet, and of them, just shy of half are carrying a “sell” rating on the stock. Just six analysts actually recommend buying Tesla shares.
A Test Track Full of Potholes
An optimistic case for Tesla is difficult to hold for any length of time, especially when looking at the totality of circumstances facing Tesla right now. Tesla expansion efforts almost seem cursed, with Tesla's expansion efforts in Germany hampered by a series of slowdowns, from the discovery of unexploded World War II munitions on the property where its new gigafactory is being built to injunctions due to plans to cut down a whole bunch of trees therein.
Worse is the picture for Tesla in China. With the coronavirus not only shutting down factory operations but also showroom floors, that's a problem for Tesla that runs the entirety of economics. Both supply and demand are impacted under such a scenario, as factory workers can't actually get to work to make the cars in the first place. Throw in the fact that many workers don't even want to try going in to work for fear of catching the virus, along with draconian quarantine and curfew policies—one worker reported that, after arriving home from work too late after a shift, police blockading his apartment building wouldn't let him in, forcing him to sleep in a park—and it's not a picture that looks bright for companies depending on Chinese operations.
Just to round it out, Tesla's recent plans to raise more capital with a new stock issue will likely serve as a further drag by diluting the overall stock value. That's also likely to poison shareholder sentiment, which has been seen as one cause of Tesla's upward climb.
There's a lot to like about Tesla; it's one of the biggest names in electric vehicles, and its gains in battery technology are hard to deny. In a field where very little advancement has been made in the last several decades, seeing a company deliberately innovate in this field is hard not to appreciate.
Tesla's near-term, however, looks like a road full of disasters in the making; how the market is seemingly ignoring all these pitfalls to drive share prices up to 52-week highs and potentially beyond is unclear at best. Only time will tell how this all comes out, but the chance for calamity remains elevated.