Why Tesla Stock Is Back To Record Highs

Tesla Stock Rallies After Strong Quarterly Report

Shares of Tesla gained strong upside momentum after the company released its quarterly report. Tesla reported revenue of $13.76 billion and adjusted earnings of $1.86 per share, beating analyst estimates on both earnings and revenue.

The company achieved record results despite supply chain problems and chip shortage which have put pressure on automakers. Tesla maintained its ambition to grow deliveries by 50% annually in the long-term.

The stock was under some pressure in premarket trading as some traders decided to take profits off the table, but it quickly managed to find buyers who pushed it to record levels that were seen back at the beginning of this year.

What’s Next For Tesla Stock?

Currently, Tesla is expected to report earnings of $5.6 per share this year and $7.37 per share in the next year, so the stock is trading at 121 forward P/E. While analyst estimates will likely move higher in the upcoming weeks, Tesla will remain an extremely expensive stock.

Traders look ready to bet on Tesla despite current valuation levels. It should be noted that Tesla’s rich valuation is an important part of the company’s fundamental thesis as Tesla can use its equity to raise funds and invest in its business without material dilution.

As usual, bears will point to “absurd” valuation levels and increasing competition from legacy automakers. However, as the market is ready to buy risk (S&P 500 is close to record highs), traders may stay focused on Tesla’s growth story and ignore valuation concerns.

It should be noted that RSI for Tesla stock is in the extremely overbought territory, so the risks of a pullback are increasing. However, Tesla stock will certainly have a great chance to settle above the $900 level and move towards the $1,000 level in case S&P 500 gets above September highs and more funds flow into leading tech stocks.

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