Tesla (TSLA) Chief Executive Elon Musk has defied big odds and consistently beat expectations since taking the helm of the electric-vehicle manufacturer in 2008. Now, with Musk having sold billions worth of Tesla stock, is it a buy?
Musk is selling a 10% ownership stake in the electric car company, a process that caused Tesla stock to fall but is just about finished. Musk recently said that he’d sold “enough stock” to reach his goal. “There are still a few tranches left, but almost done,” he tweeted
Musk sold more than 934,000 Tesla shares, valued at around $928.6 million, to cover tax withholdings, according to regulatory filings. He also exercised more than 2.1 million Tesla stock options. His Tesla stock holdings now top 177 million shares.
The stock sale began after Tesla reported third-quarter results that beat estimates, despite chip shortages and supply-chain bottleneck. Adjusted earnings jumped 145% over the same period last year, to $1.86 a share. That beat estimates of $1.62. Sales climbed 57% to $13.76 billion, matching expectations, according to FactSet.
It delivered 241,300 vehicles in the quarter, racing past estimates of 232,000. Shipments grew 20% from the prior quarter and 73% from the year-ago period. In addition, Tesla vehicle deliveries in China surged 44% from the previous quarter to 133,218. Its third-quarter results were reported late Oct. 20.
Still Bullish About Tesla’s Outlook
Wall Street analysts remain bullish about Tesla’s outlook.
Wedbush analyst Daniel Ives raised his price target for TSLA stock to $1,400 from $1,000 in a note to clients on Nov. 18. Ives says the linchpin to the overall bull thesis on Tesla remains China. He estimates China will represent 40% of Tesla’s deliveries in 2022.
“We believe 2022 will be an inflection point year for the EV industry as the stage is set for massive consumer demand in the year ahead,” Ives wrote in a note to clients.
RBC Capital Markets analyst Joseph Spak recently raised his price target on Tesla stock to 950, from 800, with a rating of sector perform. Spak did so after raising expectations on Tesla deliveries.
“The reason for our increased view is a combination of our belief that by 2025 TSLA can meaningfully expand production capacity at their Shanghai facility as well as the (yet to be brought online) Texas and Germany facilities,” Spak wrote in a note to clients. In addition, he said, “We believe there will be solid demand for Tesla vehicles as the world shifts to electric vehicles.”
However, other challenges remain. Chip shortages, while improving, may still take some time to completely disappear. And when those chip woes disappear, overall auto industry production should rebound, reducing pricing power for Tesla and others.
Wedbush’s Ives wrote: “While the chip shortage remains a lingering overhang on the EV industry, based on our recent Asia supply chain checks this dynamic is clearly moderating into the next 3 months and will move from a headwind into a tailwind for the overall EV sector in 2022.”
Will Massive Expansion Bolster TSLA Stock
Tesla has undertaken a massive expansion of its manufacturing capabilities. Musk wants to eventually build 20 million electric vehicles a year over the next decade. That’s more than double the current production of other auto-making giants. So it’s now on a mission to rapidly expand its manufacturing capabilities.
Tesla’s Berlin plant is slated to open soon, but production won’t ramp up well into 2022. Last week, Tesla told Model S and Model X order holders in Europe that it now expects deliveries in international markets to start during the second half of 2022
When Tesla starts pumping out cars in Germany, it will go head-to-head in electric vehicles with three established German names: Volkswagen Group (VWAGY), BMW (BMWYY) and the Mercedes-Benz division of Daimler AG (DDAIF). Other serious competitors include General Motors (GM) and Ford Motor (F), in addition to its China rivals. These include Nio (NIO) Xpeng (XPEV) and Li Auto (LI).
Checkup On Tesla Stock
According to the IBD Stock Checkup tool, Tesla stock has an IBD Composite Rating of 98 out of 99. When choosing growth stocks for the biggest potential gains based on the CAN SLIM investment paradigm, focus on those with a Composite Rating of 90 or higher.
The stock also has a Relative Strength Rating of 96 out of 99. The rating means that Tesla stock has outperformed 96% of all stocks in the IBD database over the past 12 months.
Its Accumulation/Distribution Rating is D+. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A grade of A signals heavy institutional buying. The lowest rating of E means heavy selling. Think of the C grade as neutral.
In the stock market, timing is critical. So when you’re looking for stocks to buy or sell, it’s important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.
Is Tesla Stock A Buy?
You’ll also find alerts to warning signs and sell signals that show when to take your profits or cut short any losses. You’ll also discover if the current stock market trend is conducive to buying stocks, or if it’s an environment where you want to take defensive action and sell.
Before making any investment decisions, be sure to check current market conditions and use IBD Stock Checkup to see if your stock gets passing ratings for the most important fundamental and technical criteria.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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