The Tesla (TSLA) juggernaut stops for no one. The week began with another stellar performance, as Tesla shares surged by 9.5% in Monday July 20’s session.
The reason behind the latest rally? It’s Tesla, is any other reason needed? Joking aside, Monday was a good day all around, with growth stocks in particular on the rise, so that might provide some explanation.
Another explanation for the surge might be this week’s Q2 earnings report. Tesla will release its latest quarterly statement on Wednesday July 22 after market close, and investors might be piling in on the hope that Tesla can deliver another estimate-beating performance.
There’s even more at stake this time around, as a fourth consecutive profitable quarter will finally make Tesla eligible for inclusion in the S&P 500 index – the standard for overall market performance. With a market cap of $290.9 billion, Tesla is currently the largest company ever to not be included in the S&P 500. As an aside, it should be noted that at its current valuation, Tesla is deemed to be worth almost five times more than General Motors and Ford – combined.
Ahead of the report, Wedbush analyst Daniel Ives believes Tesla’s chance of gaining inclusion is “already considered a fait accompli among the bulls.”
Ives, who also thinks Tesla will post a profit, said, “Tesla, facing a dark macro backdrop and COVID storm clouds, has executed flawlessly this quarter, posting 90,000 deliveries and crushing Street expectations in Aaron Judge-like home run fashion. The key focus for investors heading into this print will be: 1) 2Q profitability, 2) China delivery trajectory, 3) Model 3 demand outlook for 2H, and 4) any hints around Battery Day announcements slated for late September.”
For now, however, Ives keeps a Neutral rating on Tesla along with a $1,250 price target. Therefore, the 5-star analyst expects shares to decline by 20%. (To watch Ives’ track record, click here)
According to the rest of the analyst community, there is more downside in the cards. The Street’s average price target is $969.42, which implies shares could drop by 38% over the next 12 months. Based on 6 Buys, 11 Holds and 10 Sells, the analyst consensus currently rates Tesla a Hold. (See Tesla stock analysis on TipRanks)