It’s been fast lane-style action out-the-gate in 2021 for electric vehicle champ Tesla (NASDAQ:TSLA). And based on information available off and on the Tesla stock price chart, safely buckling in for the long haul with an eye on short-term bumps in the road continues to make practical sense. Let me explain.
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He’s now the world’s richest person on the planet. Again. Maybe, but don’t blink! I’m referring of course to TSLA’s front man Elon Musk who overtook Amazon’s (NASDAQ:AMZN) Jeff Bezos for the title in recent day, gave it up and now has the title back in his possession with shares up 6%. Pop the champagne for Elon?
More important for TSLA investors than today’s or yesterday’s media-friendly billionaire play-by-play, was a very recent and notable capitulation within the analyst community.
RBC Rethinks Tesla Stock
The surrender happened in the wake of last week’s initial dethroning by long-time bearish critic RBC which helped fuel shares higher by nearly 8% to record levels. And before you think or cry out “Top!”, if we’re to trust what the firm is now saying, tomorrow’s TSLA investors may have a lot more fuel in the tank to profit from.
Beyond confessing the error of its “underperform” rating from January 2019 and one left in the rearview mirror by TSLA’s dazzling gains in excess of 1,200%, the broker lifted shares to “sector perform” with a price target of $700. That’s not exactly a stamp of approval given Tesla was already fetching north of $750 in front of the upgrade. But under the hood of the recommendation change, RBC is certain there are reasons for investors to be excited in 2021 and beyond.
In a nutshell, RBC see’s Tesla’s ability to continue raising capital inexpensively for capacity outlays and growth a foregone conclusion. And the proof appears to be in the pudding. The EV stock’s latest raise of $5 billion was less than 1% dilutive to shareholders. Call it self-fulfilling. Yet, it is what it is… until the game stops, right?
For now, the broker promises TSLA can continue using its high stock price to fund acquisitions related to increased manufacturing capacity, the vertical integration of the supply chain or other critical technologies. And those future efforts should help Tesla vehicle sales reach 1.7 million units in 2025 at a five-year CAGR of 28% and maintain a global EV market share of around 20%.
Tesla Stock Weekly Price Chart
Source: Charts by TradingView
Led by TSLA, there’s no arguing that EV stocks offered an amazing spot, short-term at least, for huge profits this past year. QuantumScape (NYSE:QS). Nio (NYSE:NIO). Workhorse (NASDAQ:WKHS). Blink Charging (NASDAQ:BLNK). Each stock represents a small piece of a much larger pool of evidence supporting that case. But this year is going to be more challenging. And even Tesla investors should be prepared.
It’s our position the publicly traded EV market has the earmarks of a bubble that will end badly in 2021. It’s no different or easily rhymes with past investment schemes in dotcom and cannabis stocks. And rest assured the majority of today’s high-fliers are at increased risk of a treacherous wakeup call. But as the market’s undisputed 800 lbs. gorilla, Tesla is fundamentally different.
Even if shares aren’t immune to a nastier decline, TSLA is the type of stock which can be considered a buy and core holding for many investors for years to come.
Caution Still Advised
For now, however, a fairly overconfident Tesla stock weekly price chart and heady EV-based investor enthusiasm for a Democratic majority on Capitol Hill has us concerned that throwing caution into the wind could be a very ugly mistake inside the half of 2021. Maybe not an RBC-sized error but punishing all the same.
So, don’t say you haven’t been warned. More to the point, the best advice I can continue to offer through the best and worst of times ahead with greater financial and mental readiness is a TSLA collar position.
Investment accounts under Christopher Tyler’s currently hold positions in Nio (NIO) and its derivatives but no other securities mentioned in this article.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.