Tesla Falters After Optimism Over ‘Battery Day,’ India, S&P
(Bloomberg) -- Tesla Inc.’s relentless surge faltered Monday, with shares erasing a double-digit gain and dipping into negative territory, despite enthusiasm ahead of several events that include the possible unveiling of new battery technology, the entry into a lucrative new market and the stock’s potential addition to the prestigious S&P 500 Index.
Tesla shares, which had gained as much as 16% Monday before losing steam, have seen an incredible rally this year that has left Wall Street analysts struggling to make sense of the sky-high valuation -- which soared past that of Toyota Motor Corp. earlier this month. Tesla is up about four-fold just this year, despite a steep pandemic-related sell-off in February and March.
Although Tesla had kicked off this year with a strong run, its ascent has been turbo-charged after reporting better-than-expected delivery numbers earlier this month, leading many to say the company may be poised to report a profit for the second quarter. Profitability is good news in itself, but in the case of Tesla, this would also mark the fourth consecutive quarter of profit, a milestone it needs to achieve to be considered for inclusion in the S&P 500.
At the current price, Tesla’s stock reflects an expectation of 2030 volume of 5 million units, which is more than ten times what the company appears on track to achieve this year, Morgan Stanley analyst Adam Jonas said. “We’re not saying these are assumptions that are not possible, but they are a very big leap ahead from what the company has proven to date,” the analyst wrote in a report. Jonas has a sell-equivalent rating on Tesla, with a price target of $740.
Tesla jumped as much as 16% to $1,794.99 on Monday, the biggest intraday gain since March 24, but then pared most of the gains to turn negative for a brief period. At 2:24 p.m., the stock was trading up 1.6%.
Good News Abounds
Tesla late Friday said its much-anticipated “Battery Day” event will be held on Sept. 22, at its factory in Fremont, California. According to Wedbush analyst Daniel Ives, the company could announce a number of “game-changing” battery developments at the event.
“The technology innovations around Fremont remain the key ingredients in Tesla’s success on the battery front and we believe the company is getting closer to announcing the million-mile battery,” Ives wrote to clients. Ives expects the new battery to potentially last for decades, as well as withstand all types of weather and terrain.
Roth Capital analyst Craig Irwin, one of the more skeptical analysts on the Street, upgraded his rating on Tesla to the equivalent of a hold from sell, saying the company is well down the path of preparing to enter the Indian market, where the analyst sees China-like potential. “We expect tangible evidence by the end of 2020, with sales in India starting as soon as 2021,” Irwin said.
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