Tesla Stock Prediction: Why The Model 3 Is Important To Tesla’s Stock Performance

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

TSLA Stock Prediction

Summary:

  • Musk has delivered his tweeted promise of producing the first batch of Model 3 electric cars.
  • The mass market appeal of a cheaper $35k Model 3 has generated over 400k reservations last year. It’s already sold out even before production started.
  • The Model 3 is going to be final barometer if Tesla can really accomplish production targets it announces. The Model 3 is Tesla’s Model T renaissance.
  • TSLA has some bearish technical indicators but this stock’s overall technical trend signal is Neutral.
  • I Know First has positive intermediate and long-term algorithmic forecasts for Tesla.

Tesla’s (TSLA) founder and CEO Elon Musk kept his tweeted promise last July 3 that he will hand over the first 30 units of his company’s first mass-market car the Model 3 to their owners on July 28. I expect TSLA bulls to applaud Musk’s successful fulfillment of his promise by buying more shares of his company next week. The Model 3 is going to be the Model T of Tesla. Musk’s company is now on in renaissance as a real automotive company that can compete with car leaders General Motors (GM) and Ford (F).

Musk himself led the unveiling/hand over of the first batch of Model 3 electric cars.

tesla stock prediction(Source: Engadget)

The base model will retail for $35,000 (before government subsidies/rebates). It has an estimated EPA-rated range of 220 miles. The Model 3 is a lot more affordable than the base model of Model S which starts at $69,500 with a driving range of 259 miles. The entry-level Model 3 will eventually get paid upgrades like its more expensive siblings. As per Tesla, upgrade options that will be made available for the $35,000 Model are long-range battery ($9,000), Enhanced Auto-Pilot ($5,000), wheel-size upgrade ($1,500), and a premium paint job ($1,000).

In other words, Tesla’s future growth and valuation is now going to have a major tailwind from the Model 3. In anticipation of the Model 3’s commercial success, Tesla is increasing  the number of its Superchargers from 100k today to 500k by next year.

If you think TSLA is overvalued now, think of how high TSLA can fly after Tesla starts producing 3kunits/month of the Model 3. This latest EV from Tesla has already received more than 400,000 pre-orders. Those reservations for the Model 3 required cash deposits ($1,000 per reservation). Tesla therefore has compelling reason to quickly ramp up production of the Model 3 before November ends.

Model 3 Changed The Whole Ball Game

The Model 3 has notably increased the total addressable market of Tesla’s electric car products. Tesla already monopolizes the high-end segment of EVs. Tesla now has an equalizer to the cheaper EVs like the Nissan Leaf and Chevy Bolt. The Model 3 is now affordable enough even for middle-class Asians, Latinos, and Africans. My point is that the pricey Model S and Model X EVs can remain leaders in the luxury segment. The Model 3 will cater to the larger market of budget-conscious car buyers. I do not think the Model 3 will cannibalize sales of the Model S. They have different target audience.

If Tesla was able to sell almost 60k Model S last year, I expect the Model 3 to be able to also sell that much by end of 2018.

tesla stock prediction

(Source: Cleantechnica.com)

The economic benefit of Tesla selling 60k units of the Model 3 can add at least $2.1 billion to its topline next year. Tesla’s 2016 revenue was $7 billion. Analysts expect the company to achieve $11.38 billion in sales by FY 2018. A 30% increase in Tesla’s annual revenue could initiate a 10%-30% upside movement for TSLA between now and December 2018.

Conclusion

It remains to be seen if Musk’s public tweets can hurry up roll-outs of the Model 3 to hit at least 3K/month before 2017 ends. I expect the company to prioritize production of the Model 3 over the Model S and Model X. Tesla has an urgent need to prove  itself capable of actually meeting production targets of its mass-market EV.

Tesla’s stock movement more often than not, has always been dependent on Musk’s messiah-like announcements. We should just wait for his tweets regarding production volume of the Model 3. A tweet confirming Tesla can produce 2k units of the Model 3 by November or December is already a good catalyst for TSLA.

After waiting for many weeks, I Know First has finally given TSLA positive near, intermediate, and long term algorithmic forecasts. You can go long TSLA now, be patient and endure the rollercoaster ride of this stock and I Know First’s prediction might come true after one year.

tesla stock prediction

There are some bearish technical indicators for Tesla but its overall trend signal is Neutral for now. It might also be prudent if you wait a while to see if TSLA will drop and give you a cheaper entry point.

tesla stock prediction

(Source: StockTA.com)

Past I Know First Forecast Success with TSLA

I Know First has made accurate predictions on TSLA in the past, such as its bullish article published on September 20th, 2016. In the article, it mentions that the Model S, like the Model 3, will be a popular product for Tesla consumers. Since then, TSLA shares have risen 62.39% in line with the I Know First algorithm’s forecast. See chart below.

tesla stock prediction

(Source: Google Finance: TSLA)

This bullish forecast for TSLA was sent to I Know First subscribers on September 20th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

tesla stock Prediction


tesla stock prediction