A string of surprises and missed expectations set off a sharp plunge in Tesla stock this year. But with production of the Tesla (TSLA) Model 3 in full swing and the company's Model Y and Cybertruck truck in development stages, can Chief Executive Elon Musk defy skeptics and get the electric-car maker surging again?
XTesla stock has a history of being erratic, with mercurial CEO Musk frequently drawing attention with bold claims about production and profitability that have been a challenge for analysts to discern. But during the week of Dec. 16 Tesla stock surged to record highs for the first time in 16 months.
With Tesla stock continuing to hit new highs since that week, the company is expected to report vehicle deliveries for its fourth quarter sometime during the first week in January. Tesla has consistently said it expects to deliver from 360,000 to 400,000 vehicles this year. It needs to ship at least 104,500 vehicles in the fourth quarter to meet the low end of that estimate. That would be a sequential increase of 7.7% and up 46% from last year
Tesla delivered a total of 97,000 electric vehicles in the third quarter, meeting the midrange of Wall Street estimates.
Tesla Delivers Unexpected Profit
Three weeks after posting vehicle delivery numbers, Tesla reported third-quarter earnings on Oct. 22. Tesla stock surged 18% in reaction, as the company turned in an unexpected profit.
Tesla reported an adjusted profit of $1.86 a share, smashing Wall Street estimates of a 45-cent loss. Revenue of $6.3 billion was slightly below estimates of $6.33 billion.
Company officials attributed the swing to profitability in Tesla earnings to a reduction in costs. In a letter to shareholders, the company said operating expenses are at their lowest level since the company started producing its lower-end Model 3 for mass sales in 2017.
"As a result, we returned to GAAP profitability in Q3 while generating positive free cash flow," the letter said. "This was possible by removing substantial cost from our business.
"In Q3, we were able to deliver nearly as many Model 3 vehicles as we were able to produce," Tesla said in its letter. The company also said it was "highly confident" it could meet its goal of delivering 360,000 vehicles this year.
"Tesla delivered a potentially game-changing third quarter with surprise profitability and strong cash flow signaling what could be a new era for Musk going forward," Wedbush analyst Daniel Ives wrote in a note to clients.
Tesla Stock Fundamental Analysis
A fundamental and technical analysis of Tesla stock is a key component of determining whether it's worth buying.
The IBD Stock Checkup Tool shows that Tesla has an IBD Composite Rating of 83 out of a best-possible 99. The rating means Tesla stock currently outperforms 83% of all stocks in terms of the most important fundamental and technical stock-picking criteria.
It has a Relative Strength Rating of 97 out of 99. The rating tracks market leadership by showing how a stock's price movement over the past 52 weeks measures up against that of all other stocks in IBD's database.
It has a weak EPS Rating of 25, which compares quarterly and annual earnings-per-share growth with all other stocks. But Tesla currently holds the No. 2 ranking among its peers in IBD's Auto Manufacturing industry group. Ferrari (RACE) is No. 1 in the group, followed by Tesla, then Fiat Chrysler (FCAU).
The group ranks a strong No. 2 among 197 industry groups in recent performance.
Price Targets Raised On Tesla Stock
Several Wall Street analysts raised their price target on Tesla stock after it blew away forecasts with an unexpected third-quarter profit. After the report, Canaccord Genuity analyst Jed Dorsheimer raised his price target on Tesla stock to 375, from 350 and maintained a buy rating.
"We view the company as maintaining its meaningful lead in the electric vehicle revolution," Dorsheimer wrote in a note to clients.
Oppenheimer analyst Colin Rusch raised his price target to $385 from $356, and maintained a rating of outperform.
"We believe concerns on the sustainability of Tesla's business are effectively off the table," Rusch wrote in a note to clients. It has the potential to be a transformational technology company and deliver outsize returns."
On Dec. 27, reports said Tesla plans to deliver its first cars made in China beginning on Dec. 30. It will be Tesla's first full-scale production plant outside its Fremont, Calif., operation. The company also received a $1.29 billion loan from Chinese banks for its Shanghai factory.
In November, Tesla debuted its futuristic Cybertruck to mixed reviews.
Outlook On Tesla Stock
In the stock market, timing is critical. So when you're looking for stocks to buy or sell, it's important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.
Tesla endured a rough start this year, crashing 53% from mid-December 2018 to its early June low. But it's since rallied 140%.
After a lengthy consolidation, Tesla stock on Dec. 16 hit its buy point of 361.30 in heavy volume. The stock is 19% extended from that buy point, moving above the high point of its buy range of 379.37.
The stock continued to rise in the following days, setting a record high for the first time in 16 months. On Dec. 27, Tesla stock hit an intraday all-time high of 435.31. Wait to see if the stock pulls back into its buy range of 361.30 to 379.37, or wait for a new buy point down the road.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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The post Is Tesla Stock A Buy Right Now? Here's What Earnings, Charts Show appeared first on Investor's Business Daily.
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