Tesla’s [TSLA] share price has wowed investors with its electrifying surge this year and has finally gained itself admission into the S&P 500. As of 17 November, Tesla’s share price has registered a 427.7% year-to-date increase to $441.61. As the company continues to push forward with innnovative projects, what does the future hold for Tesla’s share price?
Tesla’s share price got off to a good start in 2020, climbing 112% from the turn of the year to a high of $177.41 on 4 February. The stock has continued to impress, despite some blips. It dropped to $72.24 at the height of the March market selloff, and this was the only day on which Tesla’s share price dropped below its 2020 opening price.
By the second half of the year, Tesla’s share price had largely recovered and reached a record close of $498.32 on 31 August, marking a growth of 495.5% year-to-date. However, after the company executed a five-for-one split at the end of month, Tesla’s share price tanked 33.7% over a six trading-day period, closing at $330.21 on 8 September.
While Tesla’s share price has recovered somewhat since, it hasn’t managed to top its August peak and has proven to be more volatile in November. However, there is still much for Tesla investors to celebrate, including the news that the stock will be inducted into the S&P 500. Recent reports that Tesla will again team up with French renewable energy company Neoen [NEOEN] to build a second mega battery in Australia is also a reason for optimism amongst Tesla investors.
Will a mega battery supercharge gains?
Tesla’s partnership with Neoen is to build one of the largest lithium-ion batteries in the world. The pair previously worked together on the construction of the Hornsdale Power Reserve in South Australia in 2017.
The project will support the modernisation of Australia’s power infrastructure as it looks to move from coal-fired electricity to renewable energy. The new so-called Victorian Big Battery will double the capacity of Hornsdale — which initially had an output capacity of 100MW before it was upgraded to 150MW last year — and will be able to “store roughly enough energy to power 500,000 homes for an hour,” according to the Financial Times.
Powered for an hour with Tesla's new mega battery
Following a press release from Neoen on 5 November, Tesla’s share price closed at $438.09 — 4% higher than the day before. Since then, however, the stock has dipped, falling 6.8% to close at $408.09 on 16 November.
This lack of traction could be down to other factors at play. Firstly, Tesla has been dealing with complaints from the National Highway Traffic Safety Administration about component failures that rendered some touchscreens in older-models, including the Model S and Model X vehicles, useless. In response to the complaints, Tesla is offering extended warranties to owners of potentially affected models.
“This implies added warranty expense for Tesla, which could ding profits,” Rich Smith wrote in The Motley Fool. “On the other hand, Tesla going the extra mile to take care of its customers isn't a bad thing for the company. To the contrary, this is something that would only improve customer loyalty, and thus is no good reason to sell Tesla stock.”
Tesla is also reportedly struggling to obtain the permits it needs to finish construction of Gigafactory Berlin, according to Electrek. “The company is depending on this factory to support sales of its Model Y crossover in Europe, and delays in construction could throw a monkey wrench into that plan,” Smith wrote of the delays.
A racey stock
Tesla’s share price was recently bouyed by the news that it is set to join the S&P 500 on 21 December, which has driven further optimism among investors. The announcment sent the stock up 8.2% to $441.61 on 17 November.
The median forecast among 34 analysts offering 12-month projections on Tesla’s share price stands at $409.50 according to CNN Money – with a high estimate of $800 and a low of just $40. The median price target would represent a 7.2% drop from Tesla’s share price at close on 17 November.
The consensus among 37 analysts polled by CNN Money is to Hold the stock. This is the rating given by 14, while 11 rate it a Buy and one an Outperform. On the other hand, four analysts have given the stock an Underperform rating, while seven analysts rate Tesla a Sell.
|PE ratio (TTM)||909.52|
|Quarterly revenue growth (YoY)||39.20%|
Tesla's share price vitals, Yahoo Finance, 18 November 2020