Tesla Stock Predictions: The 325K Pre-Orders For Model 3 Is A Big Tailwind For Tesla

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

 

Tesla Stock Predictions

  • The first budget-friendly EV of Tesla will be its road to profitability.
  • The 325K reservations for the Model 3 hints that Tesla’s promise of 500K car production is realistic.
  • The massive consumer interest in the Model 3 is requiring Tesla to seek more help from lithium suppliers.
  • The $35k price tag of the Model will help Tesla grow into a real mainstream car vendor.
  • The I Know First algorithm is currently bullish on Tesla Stock.

My buy recommendation for Tesla (TSLA) last February 10 was a blockbuster bet. The stock has soared more than 71% since I made that call. Tesla’s confirmation that its Model 3 received 325K reservations is inspiring bulls to push the stock back near its 52-week high (of $286.65).

Tesla Stock Predictions

(Source: Google Finance)

The massive consumer interest over the $35K Model 3 is in spite of General Motors’ (GM) Chevy Bolt announcement. This goes to show that majority of electric vehicle buyers (and investors) trust Tesla more than General Motors. Investors never rallied for GM’s stock after its entry to mass-market EVs.

General Motors is still perceived as a rookie when it comes to building and marketing electric vehicles. Tesla’s surge in the stock market confirms it is the Most Valuable Player (MVP) choice of Wall Street.

Barrons’ claim that GM will crack the electric market before Tesla is therefore just conjectured. Yes, Tesla has had difficulties when it comes to delivering its popular EVs. Tesla has learned from its past mistakes, the Model 3 will get its commercial launch late next year.

The 325K reservations for the Model 3 is a compelling reason for Tesla to rapidly increase production capacity. As far as I know, Gigafactory is still on schedule to start producing batteries next year. This should finally solve Tesla’s need to for economy-of-scale car manufacturing.

The Nevada Gigafactory was designed primarily to supply the lithium-ion batteries of the Model 3. Tesla is now actively seeking more partners to supply the lithium needs of Gigafactory. Tesla wants to protect its timetable for the Model 3. If Gigafactory starts operations next year, Tesla could hit its 500k car/year production target by 2020.

The Model 3, not the S or X cars, will guarantee Tesla’s eventual level-up as a mainstream car vendor.

The Tesla Brand Power

The implied $14 billion future sales from the Model 3 will encourage more third-party suppliers to prioritize Tesla. Suppliers also benefit a lot if they help Tesla ramp up the production (of the very popular) Model 3. The $37K Chevy Bolt simply does not exude the same brand power that Tesla has right now.

Hands-on tests of the prototype unit of the Model 3 revealed it is sporty, spacious, and high-performing. In spite of it being half the price of the Model S, Tesla is still giving the Model 3 a best-in-class treatment. The 325k reservations for the Model 3 is easy to explain. Just look at the image below, it is indeed a very beautiful car!

Tesla Stock Predictions

(Source: Tesla)

I won’t be surprised if the number of reservations reaches the 1 million count before the Model 3 arrives next year. On the other hand, even if the GM Chevy Bolt debuts on the market earlier, I doubt if it will sell 30K units (in its first year). I expect most first-time EV buyers to still wait for the Model 3.

Any manufacturing speed advantage of General Motors is useless if there’s weak demand for the Bolt.

Unlike Tesla, General Motors has yet to prove itself as a capable builder of trustworthy electric cars. This is the main reason why there’s little consumer interest in the Bolt. GM’s EV car is a first-generation experiment that cannot elicit much consumer interest.

Conclusion

The 325k reservations for the Model 3 requires a deposit. The Model 3 is therefore already helping improve Tesla’s cash flow. The Model 3’s production should, therefore, require little or no additional capital outlay from Tesla. The deposit money reservations would be enough.

People who did not heed my buy rating for TSLA last February should do so now. There’s still room for the stock to rise toward $290-$300. The momo valuation of Tesla is event-driven. The unveiling of the Model 3 last month and the 325k reservations are bull-run events.

Tesla’s stock already made significant gains since February. However, investors’ emotions are highly favorable for TSLA. Long-term technical indicators and moving averages also endorse going long on TSLA. The algorithmic forecasts for TSLA are also highly encouraging.

I Know First Predictive Algorithm gives Tesla’s stock a 1-month signal o 92.28 with the predictability of 0.27, a 3-month signal of +135.02 and predictability of 0.32 and a one-year signal of +775.07 with a predictability of 0.42. This stock is clearly trending for more upside.

Tesla Stock Predictions

I Know First’s Algorithm has predicted in the past the stock movement for TSLA. In this forecast from the 22nd of February 2016, you can see the 5.54 bullish signal and 0.26 predictability which together managed to bring an amazing return of 40.62% in just one month. The overall package had a great performance averaging a 17.625 return.


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