Tesla (TSLA) stock is poised for a near-term surge following a ‘tour de force’ first-quarter earnings report that sharply beat Wall Street expectations. The fast-growing electric vehicle (EV) maker posted $3.32 billion or $3.22 in earnings per share while revenues reached $18.76 billion. The Street had expected $2.26 a share and $17.8 billion in revenue.
Shares surged over 10% on the news Thursday though they later retreated to close just over 3%. Despite the hike, the firm’s stock remains down 16% for the year. Charts show significant gains could be in the works.
“When you see a gap up like this after a pullback, you tend to see upside follow through,” said Katie Stockton, founder and managing partner at technical analysis firm Fairlead Strategies, adding that the stock could gain in coming days and weeks.
And if Tesla can rise another $200, it could swing even higher, Stockton predicted. “Resistance kicks in around $1,200 which is pretty strong based on previous highs. It all depends on the tape [upcoming news, etc]. If it’s much stronger than now, they will have an easier time breaking through that resistance.”
The ‘sell in May and go away’ adage could spoil any upswing, however, as the stock market usually declines during that month and near-term charts show a correction could come then.
However, CFRA analyst Garrett Nelson doesn’t expect a May sell-off to dent Tesla’s growing momentum.
“The stock has already pulled back [enough] and is comfortably below its 52-week high and you have to look at the story,” Nelson says. “Every other company is struggling with inflation, but Tesla continues to buck the trend and able to pass on price increases to customers. They just had a quarter with 250% earnings growth because demand for their vehicles is very strong as well as their brand strength.”
Emphasizing consumers’ love for the brand, Nelson said there are 1.3 million cyber truck reservations worth $80 billion creating a huge revenue backdrop.
He raised his 12-month target for TSLA to $1,350 from $1,300 following the earnings call in which management assured investors future growth will hover around 50%, helping consolidate Tesla as the king of the booming EV market.
“We see them hitting new record highs in the next 12 months from its last all-time high (ATM) of $1,243,” Nelson continued. “There is a lot of near-term momentum with the Shanghai factory shutdown now over and the two new factories in Texas and Germany recently starting up.”
Echoing others, Nelson said Tesla has become masterful at ‘under-promising and over-delivering,” beating earnings expectations in 10 of the last 11 quarters. He expects the hotly anticipated, light-duty cyber truck and semi-truck models (with production slated for 2023) could be delivered sooner than expected, followed by its other key roadster mini cooper.
The humanoid Optimus Robot, which Musk says could one day be worth more than Tesla, is also set to make a debut next year. It will help people run errands or do grocery shopping, providing more upside to the stock, which mega-bull investor Cathie Wood now says could quadruple to $4,600 by 2026.
This is despite Musk’s assertion that Tesla’s autonomous or full-self driving (FSD) plans are plagued with delays (as well as plans for a robotaxi in 2024 versus a 2020 original timeline) after promising that it would be ready in 2017. Analysts say Tesla may not launch FSD until the end of the decade though they insist it’s leading the automotive industry’s autopilot race.
Then there is Twitter (TWTR), which Musk wants to purchase and take private to boost Tesla’s marketing efforts and promote free speech.
Musk has secured $46.5 billion from a clutch of banks led by Morgan Stanley (MS) to take over the social media giant and trump its poison pill through a tender offer that could succeed if 35% to 40% of shareholders back it. Musk is reportedly in talks with buyout firms to mount a joint takeover.
The deal could fall through, however, if another PE bidder (Silver Lake and Elliot Management have been floated as potential suitors) emerges, adding pressure on Musk to sweeten his $43 billion bid.
However, Wedbush analyst Dan Ives, who has a $1,400 price target on Tesla, said that “Twitter is not an ideal PE takeover given its business model and lack of FCF (free cash flow) which could create challenges to find another bidder at a higher price.”
Whatever happens, the mercurial Musk could also go through it alone:
“He has the resources, and this is a drop in the bucket when you look at his overall wealth,” added Nelson. “Some say Twitter will be a distraction from managing Tesla but if anyone can juggle all of the businesses [such as SpaceX and/or the Boring Company’] it’s him.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.