Even as the stock surges higher, one trader says Tesla shares aren’t a buy until they fall to this level.
Tesla (NASDAQ: TSLA) shares have been on a wild tear higher this year.
Year-to-date, shares of the electric car pioneer are up just under 270%. Over the last year, 512%.
And over the last week alone, the stock is up 13%, spurred on in part by speculation that the stock will soon join the S&P 500 and by a new bullish analyst rating.
Piper Sandler analyst Alex Potter raised his price target on Tesla from $939 to $2,322 – 50% higher than the price as of this writing.
“In our view, Tesla is the most consequential company in the mobility ecosystem, and this is unlikely to change in the next decade,” Potter wrote in a research note. “It’s hard to see how competitors can catch up; Tesla’s own capacity is the biggest constraint to share gains. … While deliveries are a key driver of our increased near-term estimates, software is the biggest driver of our increased DCF-based price target.”
Tesla has gotten 18 price target upgrades in the last month. But even as Potter and other analysts rush to update price targets as the stock surges higher, one trader says the stock isn’t worth buying until it drops significantly.
Boris Schlossberg, managing director at BK Asset Management, said this week that he wouldn’t be a buyer of Tesla shares unless the stock fell by $1,000 – nearly -65% below the current price.
“I feel like I’ve got to do a public service announcement here,” Schlossberg said. “I think it’s a very, very big stretch that Tesla is going to really dominate the EV industry. Even if you assume that it eventually grows into an actual profitable company, it will then just completely die on the vine because then the market is going to judge it by its real potential.”
“That’s my PSA to everybody,” Schlossberg added. “Once the company really becomes a real business, its actual stock growth is probably going to slow materially.”
But for those who want to own Tesla anyway, Schlossberg issued a warning: “If you want to trade the stock, great. But I do not think in any way, shape, or form it is an investment that is prudent at this point given the history of how these stocks trade, even if it’s the greatest car company ever made.”
Ascent Wealth Partners’ Todd Gordon, whose fund holds Tesla, sees a promising long-term trajectory for the stock. However, Gordon says the stock recently hit a level where taking some profits was a necessary move.
“We trimmed half of our position [on Monday],” Gordon said. “Traditional valuation measurements are going to be really hard to use in sort of a hyper-growth, future-shaping company like Tesla. We like it longer term. We think the analysts are forced to turn bullish, creating a very thin-air environment up here.”
Gordon also pointed to Tesla’s chart, and said he was encouraged by the “equality” of the stock’s recent rallies, namely a 447% rise from mid-2019 to early 2020 and then another 412% run from its March 2020 low.
Gordon added that the stock’s rally over the last couple of weeks pushed the price above a parallel channel he has been tracking over the last year, at which point, “we deemed it necessary or prudent to take profits.”
“Longer term, though, we still like it as a hardware play, but also as a software play with this full self-driving software package, which, in the future, you’re going to be able to buy upfront or use as a subscription, creating very high operating margins,” Gordon concluded.