Tesla Stock Prediction: Great Growth Prospect Despite Short-term Fluctuation

motek 1The stock prediction article was written by Tianyue Yu, Analyst at I Know First, Master’s candidate at Brandeis University.


  • The fourth consecutive quarter with positive profit pushed up the company valuation and stock prediction.
  • 56% battery cost reduction and price cut in major markets unleashed significant demand increase and laid the foundation for affordable electric vehicles.
  • Despite the short-term bearish sentiment, a long-term outlook for TSLA is bullish

Robust Q2 Financial Results Pushed up Stock Prediction

In contrast to stock performance in the automobile manufacturing industry, Tesla (TSLA) stock price surged more than six times under the pandemic. The financial result of the second quarter in 2020 revealed the fourth consecutive quarter generating positive profit. This positive performance mainly came from Tesla’s temporary action to reduce costs, leading to a 6.5% increase in gross margin. Another positive highlight in the Q2 report is a strong cash balance. Generally, it is risky for highly leveraged companies with limited cash flow to experience economic depression. These companies can go bankrupt without enough recurring revenues to pay down debt. This improved liquidity situation of Tesla contributed to a higher free cash flow level directly pushing up the company valuation and stock prediction.

tesla stock prediction

Exciting News – Battery Cost Reduction

This year’s annual shareholders’ meeting is themed around battery cost reduction. High battery cost is the biggest concern for Elon Musk to manufacture affordable electronic vehicles in volume. Five technical aspects mentioned in the meeting will contribute to a 56% reduction in battery cost, 54% improvement on battery range, and a 69% reduction on investment per gigawatt-hour. Some techniques including “cobalt-free” cathode and new large battery cell 4680 reinforce Tesla’s leading position.

As a further step of this achievement, Elon Musk promised to deliver $25,000 affordable electric vehicles in three years. The price is almost half of the current cheapest model and even lower than some hybrid electric cars. A cheaper model will open the door to a new segment of consumers who may not have been able to afford previous Tesla models. With appropriate control over costs and expenses, this new model will broadly support the future cash flow.

Big Move in Solar Segment for Long-Run Stock Prediction

In terms of the solar segment, Tesla has already achieved the lowest solar energy cost, $1.49 per watt, 30% cheaper than the US average level. Higher cost efficiency will allow Tesla to offer a lower price of all solar products. Since most solar installation customers are sensitive to price, this price reduction will be a favorable move. Based on the historical performance, the installed capacity of solar in the US increased more than 150% when the solar energy price declined one dollar from $2.5 to $1.5.

tesla stock prediction
(Source: Solar Energy Industries Association)
(Source: Solar Energy Industries Association)

Although, in the long run, Tesla will benefit from operating at the cost edge, it remains uncertain if we can see this positive trend in the short-term. There was no acceleration of solar roof installation after a 40% price reduction of the Solar Roof version 3 in last year October because of the pandemic. Tesla’s solar deployed systems’ number kept decreasing in the recent three quarters. We won’t see a large jump in the solar segment’s revenue before the global economy revitalized. In this case, Tesla stock prediction didn’t show a big positive response to this achievement.

Great Potential In the Chinese Market After the Price Cut

On October 1 Tesla cut the starting price of its Chinese-made Model 3 sedans by about 8% to 249,900 yuan ($36,805), and Tesla stores in the country are reporting a sharp increase in demand. This price reduction, in line with the Model Y’s price cut in North America, mainly benefits from the general improvement in battery efficiency and a lower shipping cost brought by the domestic factory and a tight supply chain. The improvement in manufacturing efficiency indicates a great potential for Tesla to keep competing in a more competitive price segment of new energy vehicles in China.

tesla stock prediction
(Source: Tesla Q2 Shareholder deck)

As the dominant electric car manufacturer, Tesla sold more than 11,000 vehicles in August in the Chinese market this year. The Chinese market will accelerate deliveries numbers and help Tesla hit the goal of delivering 500,000 cars in 2020. It is reasonable to believe that Tesla will gain sustainable revenue growth in the Chinese market from now on.

tesla stock prediction
(Source: Statistia)

Quantitative Analysis Shows Fluctuations In Stock Price

Quantitative analysis results signal some weakness in Tesla stock prediction. The stock price has been above the 50 moving average line throughout the recent six months, which is approximately the length of the last bullish cycle. Secondly, in terms of the MACD and momentum indicator, the MACD line is getting closer to the baseline and the RSI value is down closer to 50, indicating a weak momentum level.

tesla stock prediction
(Source: Yahoo Finance)


The market still values Tesla’s growth potential in the long-term horizon. After the price reduction in both the automotive and solar segments, Tesla can integrate brand advantages into cheaper and more affordable products. Despite some competitors in the industry, Tesla will keep leveraging its technology advantage and capture more market share.

The primary concern that holds Tesla stock prediction back is COVID 19’s impact on the automobile demand. Deliveries numbers are still under pressure in most markets. All the significant breakthroughs will take a longer time to transfer to favorable financial results. Tesla’s stock will be bearish in the short-term with high volatility. This temporary stock price adjustment will provide a good entry position for buying in TSLA shares and capturing the long-term return.

tesla stock prediction

My neutral conclusion for TSLA is backed by a mix of forecast results from I Know First. The short-term indicators show a slight weakness in the stock price. However, in the 12 months horizon, stronger performance is suggested by the forecasting model.

Past Success With TSLA Stock Prediction

I Know First has been bullish with its TSLA in the past. On October 28, 2019, the I Know First algorithm issued a bullish forecast for TSLA stock price. The AI-driven TSLA stock prediction was successful on a one-year horizon resulting in more than 500% gain since the forecast date. See the chart below.

tesla stock prediction

To subscribe today click here.

Please note-for trading decisions use the most recent forecast.