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Tesla stock predictions for 2020 and beyond

By Connor Freitas

The shatterproof windows of the Tesla Cybertruck recently cracked during a demonstration. Is this a metaphor for its 2020 performance?

Tesla is one of the newest carmakers on the block and has been spearheading a push into electric vehicles. The company’s colourful CEO Elon Musk has claimed Tesla’s was formed in anger at General Motors’ decision to recall their own range of electric cars because they were affecting sales of petrol-only models.

Demand for electric vehicles

Although the market for electric vehicles is currently small, Tesla is betting on being an industry giant when they become more popular. According to the International Energy Agency, there were just 5.1 million electric cars on the world’s roads in 2018 – that said, this is an increase of 2 million from the year before. Forecasts suggest this rapid growth is set to continue, with environmental concerns and strict pollution policies encouraging motorists to go electric.

Tesla sales revealed

Under Musk, Tesla has set ambitious targets for the number of electric vehicles it is delivering to consumers around the world. In the third quarter of 2019, the company managed to deliver 97,000 cars to customers – annoyingly close to the goal of 99,000 set by Wall Street analysts. Investors have been keeping a close eye on Tesla sales, and its after-hours share price tumbled by 3 per cent once news of the missed target emerged – and for a time, they were 40 per cent lower than the high point over the previous 12 months.

Tesla has aimed to produce up to 400,000 vehicles in 2019 – 65 per cent more than the year before. The company will have its work cut out to meet even the low-end target range of 360,000, as it will need to ship at least 105,000 cars – a record number.

Tesla’s safety statistics

All Tesla cars come with hardware that’s capable of “advanced driver assistance”. The feature known as Autopilot, can detect objects within a 250m range and enable the electric vehicle to steer, accelerate and brake automatically. Elon Musk is a huge enthusiast for self-driving cars – and although the current technology on offer doesn’t make Tesla cars autonomous, the entrepreneur believes upgrades could make them fully driverless within months. Work is currently underway to train the system to recognise stop signs, traffic lights and navigate narrow roads. Musk has even shared a vision where Tesla owners could turn their cars into “robo-taxis” – meaning their electric vehicle would earn money by giving lifts to other people whenever it is not is use.

Given the fact that existing road infrastructure simply hasn’t been built for driverless cars, investors have been taking great interest in Tesla’s safety statistics. The company releases data every three months, and in the third quarter of 2019, Tesla claimed there was one accident for every 4.34 million miles driven using Autopilot. Compare that with the average in the US as a whole, where a crash is reported every 498,000 miles.

But Autopilot hasn’t been without dangers and there have been fatalities when the technology has been in use. In March 2019, a Tesla smashed into a truck towing a trailer – sheering off the roof of the car and killing the driver. A preliminary investigation in May 2019 suggested that Autopilot was engaged 10 seconds before the crash and the driver had taken his hands off the wheel. This revelation saw shares tumble by 8 per cent – reaching levels not seen for two-and-a-half years. American politicians have since urged Tesla to disable the feature altogether, following reports that drivers have been falling asleep at the wheel while Autopilot was on – with one of them travelling for 14 miles.

Demand for Tesla cars and stock price trends

Musk has said that demand is strong for Tesla’s range of electric vehicles. However, even though the company continues to shatter production records, an increase in sales volumes hasn’t always translated into a profit. Take a look at the second quarter of 2019, when a loss of $408 million was reported.

The problem lies in the details. Tesla’s high-end electric vehicles, such as the Model S and Model X, represent less than 25 per cent of the total cars it sold in the third quarter. This is likely because of the hefty price tag these models attract, as they usually cost $90,000 a pop. The lion’s share of sales was found in more wallet-friendly Model 3, and 79,600 of these were delivered to motorists over the same period. Although these cars fetched $39,000 and would likely appeal to the budget conscious, profit margins are exceedingly tight on the Model 3 – and analysts say that costs need to be cut severely if this price point is going to remain viable, especially as the share of higher-end sales is continuing to fall.

Nonetheless, Tesla surprised investors when it announced that it had made a profit of $143m in the third quarter – its first since the end of 2018. This resulted in an adjusted earnings per share of $1.86, leaving egg on the faces of analysts who had been forecasting yet another loss. The company has been working hard on boosting the gross margins associated with the Model 3. Things are also looking up for the fourth quarter of 2019, too: Tesla says it has a backlog of orders to process, and the finishing touches are being applied to a Chinese “Gigafactory” that should help production costs fall dramatically compared with its operation in California.

Tesla stock price analysis and history

Tesla shares have come a long way since the company’s IPO in June 2010 at a price of $17 a share – but boy, there have been some major bumps along the way. Stock plunged by 20 per cent in January 2012 when it was announced that Peter Rawlinson, the company’s chief engineer and a key executive, was stepping down to attend to personal matters.

Disappointing earnings reports have also been a continual factor in sell-offs. Tesla shares had risen in value by more than 400 per cent over the course of 2013 – and even though an earnings report in November showed some signs of promise, with earnings slightly better than expected at 12 cents a share, prices tumbled by a total of 14.5 per cent over two trading sessions. Heat was taken out of Tesla’s share price as investors pondered whether the rather underwhelming performance justified all the hype on Wall Street.

Musk’s unusual management style has also triggered erratic market movements. In August 2018, he caused a buzz when he tweeted: “Am considering taking Tesla private at $420. Funding secured.” On the day, shares had leapt by 11 per cent to reach highs of $378 but the US Securities and Exchange Commission wasn’t far behind. It subsequently filed a lawsuit in September accusing Musk of making “false and misleading statements” – with the stock falling 14 per cent. The matter was quickly resolved and, at the start of October 2018, Musk reached a settlement that would involve him paying a $20m fine and relinquishing his role as chairman for three years. As the terms of the settlement emerged, shares enjoyed a 17 per cent bounce.

Then, there was the startling incident involving the Tesla Cybertruck, its futuristic new pick-up boasting armoured windows. At a glitzy launch event, Musk boasted that the model’s windows were shatterproof and invited a fellow executive to come on stage and throw a steel ball at them. “Really?” was the reply. Two windows cracked and the company quickly became a laughing stock online, with Musk insisting that the experiment had worked before and hadn’t even scratched the glass. Investors were not impressed – and shares plunged by 6 per cent, erasing $768m from Musk’s net worth in a single day. Over the following weekend, news emerged that 200,000 pre-orders had been placed for the Cybertruck despite the launch blunder – helping Tesla’s share price rise by $11 when trading commenced on the Monday morning.

Tesla share price predictions 2020

In terms of where Tesla’s share price is headed in 2020, many analysts appear to be upbeat that substantial increases lie on the horizon.

One financial services company, Jefferies, believes Tesla has the potential to reach $400 next year – considerably beyond the all-time high of $383 recorded in 2017. Philippe Houchois, a Jefferies analyst, has a “buy” rating on the stock given how Tesla has been working on its costs – predicting a boost in earnings and healthier balance sheets going forward.

There is some work to be done if longer-term predictions for 2020 are going to be met. In 2017, the billionaire investor Ron Baron had forecast that Tesla shares could reach $500 to $600 in 2018 and $1,000 in 2020. A major shareholder, Baron’s prediction for 2018 didn’t bear fruit in the end and share prices would need to triple if his estimates for next year are realised.

According to CNN Business, 30 analysts currently have a 13-month target of $290 for Tesla stock, which would reflect a 13.9 per cent decline from the share price at the time of writing. While a higher end of the Tesla share price forecast predicts $949 may be possible, pessimistic analysts are anticipating that prices could fall to $160.

Heading into the new year and a new decade, all eyes will be on Tesla to see how the Model Y performs. The first models of the new SUV, which will have up to 300 miles of range, are going to be released in late 2020 with a similar price point to the Model 3. The controversial Cybertruck is set to begin production in late 2021.

FURTHER READING: Market predictions: will 2020 bring riches or a recession?

FURTHER READING: Upcoming Honda vehicles are going electric – here’s why

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