Tesla stock predictions: can the popular EV stock scale new heights in 2021?
15:14, 19 March 2021
Shares in US electric vehicle (EV) maker Tesla (TSLA) soared by around 720 per cent last year. But after climbing to a fresh high at the start of 2021, the stock has little changed year-to-date following a sharp selloff in late February and into March.
The selloff was not limited to Tesla, with stocks across the electric vehicle and technology sectors plunging across the board. That has left investors wondering, is it a good time to buy Tesla stock right now? Or is there potential for the share price to fall further as some analysts view the stock as overvalued?
This article looks at the company’s recent performance and analyst predictions for the TSLA share price in spring 2021 and beyond.
The EV industry today: short-term selloff can’t stop long-term growth
The electrification of transport is one of the major growth investing themes for years ahead. All the major international car companies have committed to releasing electric models, but pure EV players like Tesla, NIO (NIO), Xpeng (XPEV) and Li Auto (LI) seem to enjoy first-mover advantage.
Morgan Stanley (MS) estimates that sales of EVs will outpace sales of vehicles with combustion engines around 2035, driven by improving economies of scale, lower costs associated with dedicated EV platforms, rising support from government policies and infrastructure and growing consumer demand.
Rising investor interest in taking early positions in EV makers has prompted a flurry of special purpose acquisition companies (SPACs) taking EV companies public. However, the interest has in some cases given way to investor fatigue, weighing on share prices across the sector.
Analysts at Deutsche Bank (DBK) said in a recent note to clients that: “our sense with speaking to investors is that there is some EV fatigue considering there are now so many pure plays available in the capital markets”.
They added:
That raises the question, is it worth investing in Tesla now ahead of a potential rebound in the sector?
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Tesla to expand sales, cede share of growing EV market
When looking at historical price data for Tesla shares, it’s important to keep in mind that the company held a five-for-one stock split in August 2020 to make ownership of the stock more accessible to investors after the price broke through the $2,000 per share level. The split reset the share price to the $400 level.
The share price initially climbed from $729.77 at the start of 2021 to an all-time high of $900.40 per share in January, right before dropping to $563 per share in early March. The stock has since ticked up to the $700 level.
Are you wondering when will Tesla stock go up again? The company is expected to continue its sales growth in 2021, launching a new version of its Model S car and opening a new Gigafactory near Berlin to supply the European market. That factory alone could produce 500,000 cars annually at full capacity – which is around the number of vehicles Tesla produced and delivered worldwide in 2020.
Is Tesla a good stock to buy now? Well, the company reported revenues of $31.5bn in 2020. US investment bank Piper Sandler expects this figure to climb to $53.1bn in 2021 and $86.7bn in 2022, which could support the share price going forward.
On February 8, Tesla said that it had bought $1.5bn in Bitcoin (BTC) and would start accepting the cryptocurrency as payment. The company held $19bn in cash at the end of 2020 and with the recent rally in the Bitcoin price, the investment is already profitable – boosting the company’s balance sheet.
Tesla’s share of the US EV market dropped to 69 per cent in February from 81 per cent a year earlier, according to Morgan Stanley, reflecting an increase in overall EV sales as Tesla’s US sales are also still rising. US EV sales increased by 34 per cent year-on-year in February and are set to rise further as the Biden Administration looks to incentivise the shift away from fossil fuels.
What does the company’s performance, and that of the wider sector, mean for the Tesla stock forecast for 2021?
Tesla stock predictions: will the stock fall further or bounce up to fresh highs?
How do analysts view the share price? Will Tesla stock go up or fall, disappointing its huge fan base?
According to MarketBeat, the average 12-month price target from 34 analysts that have issued a Tesla price prediction is $324.92 per share, with estimates ranging between $114 at the low end and $788 at the high end, with some viewing the stock as overvalued after its sharp rally. The consensus rating is hold, with 13 analysts recommending investors hold the stock, 12 rating it a sell and 9 recommending it as a buy.
Mizuho initiated coverage of Tesla stock on March 16, rating it a buy without a price target. New Street Research upgraded the stock from neutral to buy on March 15, and Wedbush Securities reiterated its hold rating on March 10, also without price forecasts. Analysts have said that the volatility in the Tesla share price and high interest in the stock from retail investors makes it challenging to issue a price prediction, as it does not necessarily reflect the company’s fundamentals.
On March 9, Sanford C. Bernstein reiterated its sell rating with a Tesla share price forecast of $180 per share.
Analysts at Piper Sandler are more bullish on the stock, issuing a price target of $1,200 per share and an overweight rating on March 12. They explained: “Seemingly every quarter, we receive questions about an apparent down-tick in Tesla’s market share. These concerns are off the mark. They stem from the company’s limited global capacity, as well as Tesla’s tendency to ‘batch’ international shipments… when scrutinising market share, it’s natural to compare Tesla’s volume to all other EV deliveries”.
However, the Piper Sandler analysts note that potential risks to Tesla reaching its price target include “production delays, failure to meet customer expectations, product defects and recalls, supply chain disruptions, slow adoption of electric vehicles”.
On the energy side of the business, Goldman Sachs estimates that Tesla’s often-overlooked solar roof system could be a $250bn market opportunity that would support the share price. Analysts said: "We believe the economics of owning solar are becoming more attractive, and that the typical US household could potentially save [more than $1,000] annually.”
Wallet Investor, a popular online forecasting service, sees the share price starting April at $690, May at $713 and June at $730. The stock is predicted to gradually appreciate throughout the year and end December at $887 per share.
The website’s long-term outlook puts the share price at $1,100 by the end of 2022, $1,325 by the end of 2023 and at $1,770 by the end of 2025.
Read more: AT&T stock forecast 2021: will shares recover after years of frustration?
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