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Tesla, Inc. is expected to experience substantial price movements in the future, with analysts recommending a Buy and predicting a short-term price range of $245 to $275, but the high price-to-earnings ratio and lower-than-average trading volume may indicate longer-term concerns and uncertainty among shareholders. (August 28, 2023)
Fundamental Analysis
Tesla, Inc. (TSLA), with a market capitalization of $758.01 billion, continues to maintain a significant market presence within NASDAQ. The company's earnings per share (EPS) stands at 3.65, resulting in a price-to-earnings ratio (PE) of 65.43, which is deemed relatively high. However, this could be indicative of the market's expectation of high growth from Tesla.
The discounted cash flow (DCF) for TSLA is $245.20, offering a perspective from a valuation standpoint. When considering the analyst consensus target prices, the high target stands at $526.67, the low target at $130, and the median target at $275. These figures imply expectations of TSLA experiencing substantial price movements in the future. The stock's last closing price of $238.82 is slightly below the DCF value and well under the median target, suggesting potential growth.
Tesla's outstanding shares are 3.17 billion, and the fact that the volume of shares traded (107.33 million) is less than the average volume (131.30 million) potentially suggests investors' cautious sentiment.
The analyst recommendations lean towards a "Buy" with 22 analysts recommending a "Buy," seven recommending a "Hold," and two suggesting a "Sell." This consensus encourages investors' optimistic outlook on the company's future stock price potential.
Regarding recent news, Tesla is being viewed as part of the future of electric vehicles (EVs), which is a growing and essential sector. This is particularly reinforced by the government's initiative on carbon neutrality. Several sources propose TSLA as a stock with strong future growth drivers, pointing out areas like energy storage and solar that could serve as additional revenue streams.
Technical Analysis
Technically, TSLA’s closing price was $238.82 on August 28, 2023, which shows a slight change of 0.23 (0.10%). The stock’s trading range for the day was $235.36 to $244.38, indicating a degree of volatility.
The Relative Strength Index for 14 days (RSI14) stands at 43, which suggests the stock is neither overbought nor oversold. The Moving Average Convergence Divergence (MACD) is -15.20, hinting that the stock is currently on a bearish trend.
The Average True Range (ATR) stands at 4.14, implying the stock is reasonably volatile. The 50-Day Moving Average is $257.42, above the closing price, and the 200-Day Moving Average is $197.06, which is below the closing price, suggesting that the stock has been trading in a range.
On a more defensive note, the stop loss is $228.93, close to the support at $224.57. The resistance level is at $241.05, which the stock would need to breach for further bullish momentum.
Prediction and Recommendation
Given the fundamental and technical analysis, TSLA could see higher prices in the short term due to the positive news and the expectation of growth in the company's revenue streams. The stock will likely perform with some volatility, moving between the support and resistance levels identified.
Expecting the stock to trade near its DCF value, the estimated price for the next trading day could be approximately $245. Given the stock's volatility, the predicted price range for the upcoming week may vary around the median target price, possibly reaching as high as $275.
However, the high PE ratio should not be overlooked, as longer-term concerns about its justified valuation persist. The lower-than-average volume may also suggest uncertainty among shareholders, despite most analysts recommending "Buy."
Evaluation
Given the company's potential for growth, the positive sentiment from analysts, and the supportive technical indicators, the recommendation would be a long-term 'Buy'. However, short-term traders might experience substantial volatility, and measures should be taken to manage this risk. The high PE ratio suggests that the stock may be overpriced for value investors. Hence, they might prefer to 'Hold' and wait for better valuation metrics. Investors should closely monitor the company and stay updated with relevant news, as these can considerably affect the stock price.
