The incredible driving in the Tesla Stock completely defies the logic

<p>Fans of Tesla (NASDAQ: TSLA) stocks have had a lot to celebrate lately. April 17 marked a record winning streak with 11 consecutive daily gains for the stock price. Which puts it at an 83% profit for 2020 so far, despite the S&P 500 being slightly down during the year. Perhaps even more incredible is the fact that the TSLA share is not at its very highest level after a record-breaking run. Specifically, it is still 16.44% lower than the record closing price reached on 19 February.

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All this is happening in the midst of the frightening background of the spread of the new coronavirus. Tesla investors seem to have an eerie ability to shake off bad news. That lasting optimism can be commendable, but is it realistic? And just as important, is bull driving sustainable?

A sky-high price target

One way for a stock market analyst to increase their profile is to publish a very unusual price target on a popular stock. For example, you will sometimes hear of an analyst assigning a zero price target on a troubled company’s stock.

Alternatively, an analyst can go in the opposite direction. This is the case with ARK Invest CEO Catherine Wood, who recently allotted a price target for the TSLA share of $ 6,800 per share by 2024.

Mathematically, this gives some interesting considerations. The price of Tesla shares was below $ 20 at one point in 2010. A decade later, it is threatening to regain its previous peak, which is over $ 900. The year 2024 is not a decade away, but the stock preceding the prelude shows what its price action is capable of.

On the other hand, an efficient market would have already priced the assumption that electric vehicles will have traction against traditional internal combustion motor vehicles. Perhaps few traders fully expected the upcoming electricity boom in 2010, but the investor community is much better in 2020.

It is interesting to note that even after the TSLA share’s fantastic rise and despite the traders ‘shaking off of the coronavirus‘ fiscal impact, Wood believes it is a “deep value stock today.” This seems to suggest that the stock is somehow too low. But then that assumption makes sense if you think it’s meant for $ 6,800.

The Ride-Hailing Thesis

If you’re wondering how Wood can justify such a price target, even after several Tesla factory closures, you’re not alone. Surprisingly, the answer lies not only in the electric vehicle but in the market for driving.

Wood predicts that Tesla will be at the forefront of an “Uber-like” service, first with human drivers and eventually with autonomous vehicles. Wood’s vision for Tesla presupposes a series of interconnected results:

“It would be so much more profitable than their base business, and it will allow them to collect so much more data, with people spending a lot more time driving their cars … That means their artificial intelligence engines will be more accurate more quickly, and we believe it will accelerate the timeline for autonomous – regulators allow. ”

Her vision also presupposes that Tesla founder Elon Musk is on board with this plan. As of this writing, there is no generally available evidence that Musk has such a plan. Moreover, even if such a plan had been published, Musk’s mercurial nature suggests that his plans may change frequently and drastically.

As for the incredibly impressive recent rise in the TSLA stock price, I will be standing with Roth Capital analyst Craig Irwin. He said, “I just can not believe this freaking stock. It’s crazy … I think this is largely FOMO [fear of missing out]. ”

Takeaway at TSLA warehouse

With the Tesla bulls on a rampage, it will be difficult to discourage fans from recharging the shares. Honestly, there is not much point in trying.

Does that make me a Tesla “hater”? Not at all, because I believe in the huge potential of the global electric vehicle market. However, it is quite different from considering that TSLA shares are a “deep value stock today.” As I see it, the market has not yet justified $ 680, not to mention $ 6,800.

David Moadel has provided compelling content – and crossed individual lines – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He also serves as chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Watching the Markets. At the time of writing, he had no position in any of the above-mentioned securities.