In what’s seen as a monster rally, Tesla’s (NASDAQ: TSLA) stock has experienced a colossal surge of over 150% in 2023, according to data retrieved as of September 14.
This remarkable surge has been propelled by a combination of factors, including stronger company earnings, a robust electric vehicle (EV) market, and strategic battery charging partnerships with industry leaders.
Furthermore, the latest jolt of momentum came just this week, as Morgan Stanley analysts unveiled an astonishing price target increase for TSLA, citing their bullish outlook on the company’s cutting-edge Dojo supercomputer.
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However, it’s not all sunshine and rainbows for Elon Musk’s giant. Notably, Tesla continues to face multiple near-term challenges, such as a slowdown in revenue growth, a contraction in operating margins, the ongoing pricing war in the EV market, and various macroeconomic risks.
So is Tesla stock a buy or a sell?
Like in most cases, there is no definitive answer to this question, as companies’ market performance depends on a string of internal and external factors.
However, one thing that’s for certain is that Wall Street and other analysts remain largely bullish on the carmaker’s future growth prospects.
For instance, popular financial advisor Kevin Paffrath recently highlighted several levers that could potentially fuel further ascent in TSLA shares.
Most notably, the expert reaffirmed that Tesla remains “heavily under-capitalized” by major funds when compared to other blue-chip stocks such as Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN), among others.
According to Kevin, only 35% of large-cap funds hold TSLA, and those that bet on the stock have relatively low allocations. For comparison, 90% of these funds hold MSFT shares.
Moreover, as mentioned earlier, Tesla’s recently deployed Dojo supercomputer also grabbed analysts’ attention.
In a 40-page report, Morgan Stanley strategist Adam Jonas said Dojo – which was developed to train Tesla’s Full-Self Driving (FSD) technology – could play a pivotal role in propelling the automaker’s valuation to as much as $500 billion
In a similar view, Elon Musk said on September 11 that nearly “all of Tesla’s value long-term will be from AI & robots, both vehicle & humanoid.”
Risks of investing in Tesla
As with all investments, betting on TSLA does not come without its risks.
Although its revenues increased by 47% in Q2 year-over-year, that growth was still slower than in previous years. In addition, Tesla reported an operating income decline of 3% due to a notable drop in its operating margins from 14.6% to 9.6%.
And while Tesla’s sales may be on the rise, the company is making considerably less profit per vehicle.
The key factor behind this is Tesla’s aggressive pricing reduction strategy, which was deployed to help it grow its market share. However, such an approach carries notable inherent risk, which could intensify further if the current economic environment deteriorates further.
TSLA stock price analysis
At press time, TSLA shares stood at $271.30 apiece, up 1.43% on the day.
The carmaker saw its share price surge by over 6% on the weekly chart and more than 15% in the past month.
Evidently, TSLA has continued to move higher in recent weeks amid the improving macro for tech stocks.
The bulls are now eyeing a move toward the 2023 high near $300. However, this is possible as long as the stock trades above the 100-weekly moving average (WMA), which currently comes in at around the $250 mark.
In the meantime, the descending trend line, which has provided resistance for about 2 years, will offer a strong barrier to buyers at around $290.
A break of this trend line would mark a major technical development and a bullish sign that Tesla shares rally can continue.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
