Perhaps the ultimate Cinderella story of 2020, Tesla (NASDAQ:TSLA) fought its way up to four-figure share prices, brought stock splits to investors, and made incredible headway, only failing to meet its latest goals by the slimmest of margins. The company that made mock of short-sellers and put options the world over had an amazing year, but 2021 might be a bit tougher as the company searches for fertile ground in new locations.
Pushing the Chinese Sales Hard
Tesla made a great step forward for an electric vehicle maker, and particularly so for one not started in China itself: it delivered the first Model Y crossover vehicle Tesla made in China. It's a move that's both immediately important—one more sale in the books—but also symbolically important, as Tesla goes on the hunt for more and greater sales. After having missed last year's goal of half a million units delivered by a likely heartbreaking 450, there will likely be a much more substantial push to land sales and keep cars rolling out the door.
To that end, Tesla has also been ramping up its production capabilities. One of the biggest problems the company had, reports note, was getting enough batteries to do the job. Thus, the company put its own battery factory to work, and will use the output therein to augment what comes in from partner firms. With several new models of Tesla—including the vaunted Cybertruck, as well as the Tesla Semi and Tesla Roadster—poised to emerge, putting together more battery production will help keep Tesla models on hand and give the company some extra room to make sales.
An Unusual Analyst Atmosphere
There are some unexpected developments coming in around the analyst view, though, that bear consideration. Our latest research puts Tesla at a “hold”, where it's been for the last six months, though sentiment overall has been in a decline for the last three months. Six months ago, the company had 12 “sell” ratings, 16 “hold” and six “buy” to its credit. Three months ago, that shifted to 10 “sell”, 15 “hold” and eight “buy.” A month ago, it was 11 “sell”, 13 “hold” and eight “buy”, and now the company has added one more “sell” to last month's figures.
Price targets have been steadily climbing, though, and have represented downside for the last six months, going from $164.68 to $311.75. The stock currently trades at $842.46 as of this writing, so it's clear that there's quite a bit of disconnect between market performance and expectations.
That's not where the strangeness ends, though; rather, where it begins. A recent report out from RBC Capital Markets both lifted the company's price target and also expected that Tesla's growth rate would “dramatically” slow down over the course of the next five years. Given that RBC's price target went from $339 to $700, that's a rather big jump. However, it's also important to note that just because a growth rate slows, it doesn't represent a loss. Still, for a company built on big gains, a sudden plateauing might prove disappointing to investors looking for gains.
Explosive Potential All Around
The good news for Tesla is that it continues to enjoy its first-mover advantage, and is savvy enough to know that it needs to build on that advantage to get anywhere. It's ramping up its battery production to kill the one big hole in production it had, though given that the company missed its sales goals last year, just how much of a problem production was isn't clear.
The bad news, however, is that Tesla's first-mover advantage lunch is rapidly being eaten by competitors. Not only do we have a range of firms getting into the market, like car makers like Nio (NYSE:NIO) and Ford (NYSE:F), but we also have firms no one ever expected to see get involved in electric cars, like Apple (NASDAQ:AAPL). We also have current firms making inroads on the market, like Xpeng (NYSE:XPEV) improving an autonomous driving system to make it a match for Tesla's own. Yet Tesla's gains in battery technology represent a major new potential market as a home electric power source; just ask Californians who bought in on Generac (NYSE:GNRC) generators to fend off forced blackouts in high wind conditions.
A good chunk of Tesla's growth was likely owing to the fact that Tesla was a first-mover, and with competition increasingly nipping at Tesla's heels, its phenomenal growth is likely to get curtailed. Tesla has long been a highly volatile stock—just ask anyone who bought in early last year—and that could be all the reason investors need to stay out of the stock for a while while some of this volatility works out and the market itself firms up.
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