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Tesla’s Rally To $500 Depends On This One Catalyst

Tesla’s Rally To $500 Depends On This One Catalyst

Shares of Tesla can rally to $500 – but this big piece has to fall into place first. Here’s what you need to know.

Tesla stock (NASDAQ: TSLA) has seen some momentum this week on the back of votes of confidence from two analysts who say the stock can reach $500 – over 40% above today’s prices.

But the $500 price target hinges on Tesla’s ability to ramp up production of its mass-market Model 3 vehicle to 5,000 cars per week.

Romit Shah, an analyst at Nomura Instinet, wrote late last week that he thinks the Tesla narrative could shift from “insolvency risk and cash burn” to “market opportunity and growth” within three to six months and that meeting production targets for the Model 3 would improve cash flow.

Additionally, Shah believes the development of the gigafactory in China could provide a tailwind and be an “enormous” market opportunity as the country loosens up its auto policies.

Shah believes that Tesla could be worth roughly $100 billion within two years, which would push the stock to $500 per share.

Analyst Alexander Haissl at Berenberg agrees, reiterating his buy rating on the stock this week. Haissl said Tesla’s margin outlook on the Model 3 “is not hope, but reality,” and lifted his price target from $470 to $500.

Haissl also believes the company’s superior electric architecture is still “overlooked,” especially by those who say that competition from traditional car makers is a massive threat to the company.

“Imminent competition from traditional Original Equipment Manufacturers (OEMs) is often cited as a key threat to Tesla, but this underestimates the full extent of Tesla’s technology advantage, which manifests in the entire electronic architecture design,” Berenberg analysts wrote in a research note to clients.

But Tesla is at a bit of an impasse, and reaching its production goal of pushing out 5,000 Model 3 vehicles per week could very well be the make-or-break catalyst that pushes the stock higher – or sends it crashing.

The estimated time for delivery of the Model 3 has been lowered, which suggests that production is going better than expected. Time will tell if the company will actually meet the target—or come close—and the next earnings call promises to be an interesting one.

Still, even if the second quarter results leave something to be desired, bulls may still run the stock higher if the outlook for the third and fourth quarter are especially bright. Stay tuned.

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