Why Tesla Stock Is Trading At Multi-Month Highs

Tesla Stock Moves Higher As Traders Stay Bullish Despite Lofty Valuation

Shares of Tesla moved to levels last seen back in April and continue to move higher as traders bet that company’s profits will continue to grow despite problems faced by the auto industry due to chip shortage.

Interestingly, shares of established automakers like General Motors or Ford have been under pressure in recent weeks, so traders continue to choose Tesla despite its lofty valuation.

Analyst estimates have been moving higher in recent weeks, which is bullish for Tesla stock. Currently, analysts expect that Tesla will report earnings of $5.3 per share in 2021 and $6.97 per share in 2022, so the stock is trading at 106 forward P/E.

What’s Next For Tesla Stock?

Analysts expect that Tesla’s profits will continue to grow at a fast pace, but the pace of growth cannot explain the valuation provided by the market. As usual, traders are ready to take the long-term view and bet that Tesla will be the dominant force in the electric vehicle market for years to come.

It should be noted that S&P 500 is trading at all-time high levels, and Tesla is one of those mega-cap stocks that is trading well below its all-time highs. Back in January, Tesla stock made an attempt to settle above the $900 level but lost momentum and pulled back towards the $550 level before rebounding to $740.

It is likely that Tesla receives support from traders who are willing to bet that mega-cap stocks will remain the main driver of the market and search for shares which trade far from their all-time high levels. In the current market environment, traders are ready to ignore valuation concerns, and Tesla stock has decent chances to gain additional upside momentum in the upcoming weeks unless there is a broad market pullback.

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