Tesla rose more than 2.7 percent on Thursday, breaking its record closing high of $404.04, the first time in history that it has closed above $400. It marked a incredible 55 per cent jump in Tesla’s third-quarter earnings on October 23, when Elon Musk shocked Wall Street with a net profit of $143m.
The electric car maker’s share price is close to Musk’s infamous privatization price of $420. On August 17, 2018, Musk tweeted, “I’m considering privatizing Tesla for $420.” Funding is available. The famous tweet ultimately led to Musk being fined $20 million by the Securities and Exchange Commission.
Most Wall Street watchers believe there are several factors that will cause Tesla’s share price to continue to soar in 2020.
First, the company’s shock quarterly profit reduced Tesla’s chances of raising cash at high costs. In addition, Wall Street believes that a more focused Musk is helping to build the operational discipline needed to run a profitable car company.
On the other hand, this emerging theory has also knocked Tesla short. Dan Levy, an analyst at Credit Suisse, said: “Given the strong positive data, Tesla’s share price is higher on the back of a short-term correction, and there may be some long buys.” “
Meanwhile, Tesla’s Shanghai super plant has begun rolling out cars, which could boost Tesla’s hopes of selling cars in China.
Despite the good news, that doesn’t mean Tesla’s share price will rise another 50 percent in two months. Indeed, some on Wall Street believe tesla should be kept cautious given its short-term surge in share prices.
“In this case, expectations for Tesla are likely to rise, ” says Mr Levy. At this point, analysts expect Tesla to return to profitability when it reports fourth-quarter results early next year. Given the company’s turbulent past, there is certainly no guarantee of profits for two consecutive quarters. “And the market doesn’t like it at all.
Based on purely technical analysis, Tesla’s stock now appears to be seriously overbought.
“There’s been overbought in both the short and medium term,” said Matt Maley, strategist at Miller Takak. We acknowledge that the weekly RSI chart has been more extreme in the past (specifically 2013 and 2017), but it is still quite overbought. Marley points out that Tesla has tested current price levels four times in the past year, each with a severe decline (the smallest drop is 20 percent).
“Tesla has gone up 50 percent in less than two months (up more than 100 percent in just six months), so its risk/reward equation is not as favorable as it was at any other time this year,” Marley warned. “