The past two weeks saw a reversal of fortune for Tesla (TSLA) shares. The stock has rallied 10 trading days in a row, and is up nearly 65%.
There’s one reason why investors are particularly bullish on Tesla — success in Shanghai.
Recent drone footage displays recent manufacturing capacity expansion at the firm’s new, highly anticipated Shanghai location. In addition, the plant will be producing and offering a longer-range/deluxe edition of its Model 3 strictly for Chinese customers. This redesigned version is already instilling hype among consumers and, according to Bloomberg, could be rolled out as early as this week. For the tech titan, this international expansion is exciting and rather promising in pursuit of some of its longer-term goals such as gaining foreign market share.
However, while all may be well in China, the US is a different narrative. Similar to almost every other large corporation, Tesla is currently having difficulty generating sufficient revenues. So much so, in fact, that the company was unable to pay monthly rent on its premier Fremont manufacturing facility in March. In order to achieve long-term success, Elon Musk disclosed that TSLA “will be reducing [its] monthly rent obligations effective immediately” without uttering a word of negotiation. The production site has already been closed for nearly a month, and the earliest it could possibly reopen is likely mid-May.
For 5-star Wedbush analyst Daniel Ives, it’s evident that Tesla currently boasts two very different sides of the same coin. Ives recognizes the fact that although the company is demonstrating efficient mobility into a foreign market and recently beat Q1 delivery guidance, TSLA has nevertheless been unable to pay rent on its main factory and will face serious revenue cuts throughout ensuing months. While Tesla’s long-term goals may still be intact, more uncertainty looms in the near future than ever before.
For the time being, it appears that the company’s strengths are outweighing its weaknesses. However, Ives begs to differ, forecasting the stock’s price to be a meager $425 one year from now, which would represent a 45% decline from its current rate. (To watch Ives’ track record, click here)
Until Tesla’s Battery Day is held and Model Y demand trajectory is announced, both of which will likely occur next month, Ives is staying sidelined on Tesla. Wall Street at-large exhibits a similar consensus. Out of the 29 analysts tracked by TipRanks (in the past 3 months), 6 rate the stock a Buy, while 14 maintain a Hold, and 9 issue a Sell. With an average price target of $520.75, TSLA suggests 31% downside from current levels. (See Tesla stock analysis on TipRanks)
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