Tesla stock (TSLA)is on the cusp of a big breakout after last week’s surge.
The stock looks to be going parabolic again, and many euphoric investors are likely to chase Elon Musk’s EV behemoth into the stars as it regains its momentum.
There’s still a lot of speculative appetite in this market, and Tesla could indeed blast past the $1,000 mark. Despite a promising price target upgrade courtesy of Jefferies, though, it’s tough to justify the hefty multiple in the automaker, even if you view it as a tech company that can easily shrug off rivals in the EV space.
Elon Musk is an absolute genius, but at these heights, it’s tough to get behind the name. A 22.9. sales multiple leaves too much room to the downside. (See Insiders’ Hot Stocks on TipRanks)
For that reason, I am bearish, but I wouldn’t dare bet against the stock amid its newfound momentum. Dr. Michael Burry recently told CNBC that he’s done betting against TSLA stock with puts, for now.
The magnitude of overvaluation may be unprecedented. With Burry being squeezed from his trade, there’s no telling when Tesla stock will come back down to Earth, and whether the stock will touch quadruple digits before doing so.
Chip Shortages
Tesla has done a remarkable job of mitigating the global chip shortage thus far, and the stock has been rewarded handsomely.
For the third quarter, the company revealed deliveries of over 241,000 vehicles, thanks to strength in the Model 3 and Y. Deliveries were up 73% year-over-year.
With new products, including the Tesla semi on the way, there are many reasons to get excited about the company as it looks to build on three straight quarters of better-than-expected strength.
While the numbers were undoubtedly impressive, the valuation seems to discount the competitive pressures that could present themselves over the next decade. It’s not just the traditional automakers going electric that investors should have on their radars.
Apple (AAPL) is one company that could swoop in and steal Tesla’s slice of the pie. After Tesla stock’s latest run, the company now commands an $844.5-billion market cap. If shares eclipse $1,000 per share, it’ll put the $1-trillion market cap mark to the test.
Tesla finds itself atop the EV market today, but that could change on a whim, especially once the curtain is pulled on an Apple Car, a not-so-secret secret project the tech behemoth is working on.
Apple Car
Given recent advancements featured in Apple CarPlay, there’s no question that Apple has an impressive software foundation that could act as an on-ramp into EVs.
Apple’s car software is excellent, but remember, the company is all about mixing great software with next-level hardware.
At this juncture, Apple looks like it could pose the most significant risk to Tesla’s rich multiple over the next five years.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, TSLA stock comes in as a Hold. Out of 26 analyst ratings, there are 12 Buy recommendations, seven Hold recommendations, and seven Sell recommendations.
The average Tesla price target is $699.81. Analyst price targets range from a low of $150 per share, to a high of $1,200 per share.
Bottom Line
The spread between the Street price targets on TSLA stock is remarkably wide. Undoubtedly, analysts are split on the name.
These days, Tesla looks to be valued as more of a disruptive tech company, and less as an automaker. In terms of disruptive tech though, it’s hard to not clash with the likes of Apple, a hungry company that’s brought many firms to its knees in the past.
If competitive pressures of traditional automakers can’t challenge Tesla’s innovative dominance, tech-centric competitors like Apple surely can.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
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