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Should Investors Be Tempted to Sell Tesla Stock?

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On June 12, Tesla (NASDAQ:TSLA) stock lost 3.9% and closed at $935.28 with a market cap of $173.4 billion. The stock fell after Morgan Stanley analyst Adam Jonas downgraded the stock to “underweight” from “equal weight.” The analyst also decreased its target price on the stock from $680 to $650. According to a report from TheFly, “In the nearer-term, Jones said he worries about risks to demand and pricing. Over the longer-term, Jonas said that among the many risks facing Tesla, he would rank risks related to U.S.-China relations at the very top. Any potential deterioration of relations with China could disproportionately impact Tesla.”

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Tesla’s stock price has risen by 5.6% in the trailing five-day period, while it has risen by 347% in the trailing 12-month period. The stock is trading 9.0% below its 52-week high of $1,027.48 on June 10. The stock was also trading 343.3% above its 52-week low of $211.00 on August 23, 2019. On a YTD (year-to-date) basis, the stock has risen by 123.6% as of June 12.

Analysts’ recommendations for Tesla stock

Among the 34 analysts following Tesla stock, nine recommend a “buy,” 12 recommend a “hold,” and 13 recommend a “sell.” Analysts have an average target price of $640.97 on Tesla. The target price implies a return of -31.5% based on the closing price of $935.28 on June 12. The consensus target price for the stock has risen from $606.04 in May—a growth of 5.8%.

Last week, Goldman Sachs analyst Mark Delaney downgraded Tesla stock to “neutral” from “buy.” However, Delaney increased its target price on the stock from $925 to $950. According to a report from TheFly, Delaney said, “The recent outperformance in the stock is due to Tesla’s strong Q1 margins and increased investor awareness of the favorable long-term outlook for EVs, and while the valuation has expanded for the entire market, the bar for Tesla’s fundamentals is higher than for other stocks given its premium absolute multiple along with its historically high volatility.”

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Tesla’s growth projection

In the first quarter of 2020, which ended in March, Tesla delivered revenue of $5.99 billion—a growth of 31.8% YoY (year-over-year). Wall Street expected revenue of $5.98 billion. The company posted an adjusted EPS of $1.14, which beat the consensus estimate of -$0.25.

Wall Street analysts expect Tesla to report an adjusted EPS of -$1.34 on revenue of $4.8 billion in the second quarter. Analysts also expect the company’s revenue to rise by 8.2% YoY in 2020 to $26.6 billion. The sales could rise by 39.9% YoY to $37.2 billion in 2021. Meanwhile, the adjusted EPS will likely rise from $0.20 in 2019 to $4.02 in 2020. Analysts expect a non-GAAP EPS of $11.25 in 2021.

Stock returns

Tesla stock closed 7.5% above its 20-day moving average of $869.86 on June 12. However, the stock was 20.9% and 31.1% above its 50-day and 100-day moving averages of $773.58 and $713.16, respectively. Tesla’s 14-day MACD is 83.70, which indicates an upward trading pattern. With a 14-day RSI (relative strength index) score of 60, the stock isn’t overbought or oversold.

Tesla has a middle Bollinger Band level of $869.86, while its lower Bollinger Band level is $742.04. On June 12, Tesla stock closed near its upper Bollinger Band level of $997.67, which suggests that the stock is overbought.

Currently, Tesla stock is trading at 232.59x its 2020 estimated adjusted EPS of $4.02. The stock is trading at 83.11x its 2021 estimated adjusted EPS of $11.25. Analysts expect Tesla’s earnings to rise at a CAGR of 282.4% over the next five years.

Tesla stock fell by 3.0% in the pre-market trading session today at 6:29 AM ET. At the same time, the S&P 500 futures fell 1.43%, while the Dow futures fell 1.63%.

According to a Reuters report, Tesla’s China car registrations grew to 11,565 units in May—up from 4,633 units in April.

Read Jim Simons’ Renaissance Technologies Is Bearish on TSLA and Are NIO and Tesla Stocks Still ‘Buys’ after the Sharp Rise? to learn more. Also, read Tesla or Apple: Which Is a Better Stock to Buy? for more insight on Tesla.

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