Tesla Is The Most Upgraded Stock In January 2022
While it’s hard to say for certain who will lead the next rally in tech stocks Tesla (NASDAQ: TSLA) is as good a choice as any. The company is riding a wave of accelerated EV expansion that is boosting its reach even as internal efforts to boost production pays off. What this means in terms of the analysts and their impact on the stock price is a round of analysts’ price target increases that make it the most upgraded stock so far this year. Whether or not the company leads the next revolution is irrelevant in that light, between now and then we see this stock moving higher under the influence of improving results and the analyst’s sentiment for the stock.
Tesla has received 13 price target increases in the last month with 11 of them occurring in calendar 2022. These included increased targets from low-target holders like JP Morgan and Citigroup which have two of the three lowest targets on Wall Street. The takeaway is that, even with these low targets in the mix, the Pricetargets.com consensus price target for Tesla is $896 and assumes at least 3.5% of upside for the stock. More importantly, the consensus target has been rising like a rocket and we don’t see it stopping. The consensus is up 185% in the last year and nearly 13% in the last month and is still only keeping pace with price action. In our view, the $1,580 high price target held by New Street Research in December is a swing-for-the-fences target but one we think will be reached sooner or later.
Ignore The Institutional And Insider Selling, Buy Tesla
The institutional and insider outflows in Tesla have been enormous this year and may signal trouble for the stock but we don’t think so. The selling is due to profit-taking by early and long-time shareholders who are cashing in on the stock’s 2000% gain over the last two years. While we don’t wish to see this kind of activity in any stock we own, the net impact on share count and supply/demand is in the single digits. In our view, selling in the final quarter of 2021 has pushed the price action down to more reasonable levels and is back in line with the trend. With the Q4 earnings release expected later this week we see this as a buying opportunity but one that may take time to develop.
Part of Tesla’s rise to such lofty valuation is the revenue growth. The problem is the 55% in YOY growth expected for the Q4 period may already be priced into the stock. Without a substantial top and bottom-line beat, and those are both entirely possible, price action may continue to fall along with the broader market until valuations and growth get more into alignment. On that front, Piper Sandler issues some favorable commentary when it reiterated an Overweight rating last week. Piper says the company is on track to deliver more than 1.53 million vehicles this year due to production increases at the Gigafactories which would be a 63% increase over 2021.
The Technical Outlook: Tesla Shares Enter Correction, Again
Shares of Tesla began the week down roughly 10% and may go lower before earnings are released. If the report isn’t enough to justify the high 146X earnings multiple we expect to see the shares fall down to the $800 level or lower. In that scenario, we’d anticipate a bottom above $600 and a return to all-time highs in late 2022 or early 2023. If support is able to hold near the 30-day moving average, however, this stock could consolidate above the $800 level and possibly move to new highs well before the end of 2022.
Companies in This Article:
