The Tesla stock forecast was written by Hugh Camiener, Analyst at I Know First. Bachelor of Arts candidate at Columbia University.

Summary

• Tesla handily beats sales expectations, delivering 90,650 cars in Q2.
• Solar panel price reductions make Tesla the lowest cost ever to go solar. 
• The volatility of Tesla and optimism surrounding the future of EV makes Tesla a high-risk high-reward option.
• I anticipate Tesla will be slightly bullish for the remainder of 2020.

Tesla Beats Expectations By Wall Street

Tesla’s stock has soared after they announced it has delivered roughly 90,650 cars during the second quarter, easily surpassing expectations of around 72,000-83,000 by Wall Street. Tesla has dealt with economic downturn better than most competitors. Deliveries by Tesla have fell by only 4.8% in comparison to Q2 2019. General Motors, Fiat Chrysler, Toyota, and Ford all saw their second quarter deliveries decrease by more than 30%. Tesla now has the largest valuation in the car market despite only selling a fraction of units in comparison to Toyota.

Why Has Tesla Outperformed Their Competitors?

In 2018 and 2019 Tesla has proven that pricey electric cars are acceptable to Americans. Since, Tesla has completely dominated the EV market. A major component of Tesla’s success lies in the Model 3.

With 150,000+ units delivered, the Model 3 was the 9th best selling car in the US and the #1 luxury vehicle. Both the Model 3 and Tesla’s new Model Y made up 88% of the cars sold during Q2 of 2020.

While Tesla has a 29% global market share of EVs, they also hold a 15% market share of luxury vehicles within the United States. The effects of Covid-19 has largely caused the automotive markets to enter a slump. However, the luxury EV market was not as volatile.

Tesla’s online delivery method is also perfect for the post-Covid world. With car companies flocking towards creating their own online delivery services, Tesla remains ahead of the competition. 

Can Tesla Sustain Its Dominance?

While Tesla has been winning the EV markets, both traditional and new consumer brands are starting to join the mix. There are expected to be 17 EV models in the US market by the end of 2020. However, few vehicles will be able to compete with Tesla’s Model 3. The majority of EV models are either too expensive or have too little mileage to be considered mainstream options. With the addition of the Model Y, a $40k crossover SUV, Tesla will sustain its market share. Right now, EV competition is not a threat to Tesla’s success. With the EV market set to increase 36% by 2021, Tesla could begin to capture huge profits in the near future. US automakers Ford, GM, and Fiat-Chrysler remain committed to electrification, and new EV companies pose a more distant risk

Tesla Solar Panels

Although Tesla’s energy business only makes up 5% of Tesla’s revenue, the business could be as large as its automotive counterpart. Tesla has created the lowest ever cost to go solar in the US, one third less than the industry average. In Q1 2020, the Solar Energy Industries Association average residential solar price was $2.83 per watt. Tesla’s panels could reduce the price to $1.84 per watt, with the largest system. An average customer in California could save almost $88,000 over the system’s lifetime. The reduced priced solar panels make a good long-term investment for those who are looking to save money on energy. Though there are concerns with the high level skills needed to install the solar panels, Tesla is in a prime position to dominate the future of electrification globally and Elon Musk believes the energy business could become larger than its automotive counterpart. 

High Volatility

Tesla remains an extremely volatile stock which can “pop” or “drop” very quick. Tesla’s stock can be easily manipulated based on earrings reports, news, and even tweets:

Elon Musk’s tweet on May 1st drove investors into a frenzy. Shares dropped 50% from a February high of $901. Though Tesla’s stock has surged since, the bleakest signals of distress impact the company immensely. Tesla is not the only car company to exhibit highly volatility, Nikola Motors, a recent IPO and new competitor of Tesla, has jumped almost 500% from April. Nikolai Motors has not sold a single car, yet the company’s valuation is similar to Ford. Unlike Tesla, Nikola Motors is attempting to use hydrogen energy to power vehicles. Though Musk claims hydrogen energy is “dumb,” investors are looking past their revenue and towards a cleaner, sustainable method of transportation. Nikolai Motors is a good example of how Tesla could be considered overpriced at the moment. Both car companies’ value lies in future optimism, and Tesla’s stock is easily manipulated by each report that comes out.

Conclusion

I believe that Tesla’s stock will be slightly bullish for the rest of 2020. With traditional car companies lacking sales and online delivery services, Tesla’s reasonably good quarter plays into the volatility of the stock and I expect Tesla to continue their success throughout 2020. The major factor which could potentially harm Tesla’s stock lies in the future competition from American automakers, which composes most of Tesla’s current revenue. However, I do not see them impacting Tesla’s dominance in 2020, and I expect Tesla’s economies of scale to strengthen. While Tesla is likely going to have a volatile year, in totality, the high-reward of Tesla’s future will lead to a slightly bullish year for the stock.

Past I Know First Tesla Stock Forecast Success

I Know First was successful with Tesla stock forecast. On June 16, 2019, the I Know First algorithm issued a bullish 1 year Tesla stock forecast and the algorithm successfully forecasted the movement of the TSLA stock.  After 1 year, TSLA shares rose by 356.97% in line with the I Know First algorithm’s forecast. See chart below.

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