What’s Ahead for Tesla in 2021?

Tesla Inc. (TSLA) is trading above 700 for the first time on Thursday, just ten days after the company was added to the SP-500 index.  CEO Elon Musk’s creation is set to close out 2020 with a phenomenal 840% annual return, fueled by an incredible recovery after the stock fell nearly 60% in the first quarter’s pandemic decline.  August’s 5-for-1 split didn’t hurt, with so- called ‘Robinhood traders’ loading up on shares ahead of that structural event.

The Future Looks Bright

The stock is unlikely to duplicate 2020’s historic performance in 2021 but the future is bright for the EV manufacturer, who is set to enter the Indian market next year. Even so, competitive challenges are growing, with reports that Dow component Apple Inc. (AAPL) is working on an autonomous automobile line set for production in 2024 while numerous mainline manufacturers have unveiled fully-electric vehicles.

Jefferies analyst Philippe Houchois discussed growing headwinds earlier this month, lowering Tesla to ‘Overweight’ while raising the price target to $650, noting “We don’t believe Tesla can dominate Autos, given industry structure and politics, but multiple challenges to the auto business model (EVs, batteries, software, autonomy, design-to-manufacture and direct selling) ensure a durable competitive edge, with a “messianic” brand reaching far beyond autos.”

Wall Street and Technical Outlook

Wall Street has grown skeptical after historic share gains, posting a consensus ‘Hold’ rating based upon 7 ‘Buy’ and 11 ‘Hold’ recommendations. More importantly, 7 analysts now recommend that shareholders take profits and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $788 while the stock opened the session more than $240 above the median $458 target. There’s no doubt that analysts think Tesla is over-valued, given this placement.

The price chart shows little selling pressure despite heavy-handed ratings, lifting accumulation readings to new highs. A symmetrical triangle correction between September and November worked off extremely overbought readings through time rather than price, setting the stage for a strong run into year’s end. Despite sunny skies, this is a nearly perfect set-up for a January capital gains selloff, with investors booking outsized profits in the new tax year.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.