TRADE ALERT: Tesla stopped out
5th February 2020 |
My stop on Tesla was triggered this morning at $800 against the original purchase price of $346.41. We are at least due some consolidation but if history is any guide that could be very volatile and $400 is likely now the next big entry point.
We are heading into the next big investment cycle for the company. The big question Tesla has to answer is how it is going to get to the scale of other car manufacturers. The only answer is to build a lot more manufacturing capacity and that is expensive.
The profits of the last two quarters were generated by cutting back on capital expenditure, but that is not sustainable for a growth company like Tesla. It has proven it can make a profit, now is the time to start making losses again. That’s suggests some uncertainty and volatility.
Meanwhile, the analyst community has been competing for the most bullish forecast. My initial target was $1,000 two years ago. It got within $31 of that level yesterday.
Over the last couple of weeks Wall Street has been competing to catch up and it has steadily been raising target prices from $300 to $400 to $500 to $750 to $850 and Ark Invest yesterday came out with a target of $7,000. I even saw one article detail how they anticipate Tesla will become a $20 TRILLION company, so 20 times larger than Amazon.
The easiest way to make a name for yourself in a bull market is to be the biggest bull. All analysts know this, but when they compete for the title it leaves fundamentals in the dust. We’ve just seen that with Tesla and this is an opportune moment to step aside.
All the best,
Eoin Treacy
Investment Director, Frontier Tech Investor
