Naman Shukla is an Analyst at I Know First. He writes and invests in the stock market. Ranked in the top 8 percentile in TipRanks.com. Featured on SeekingAlpha.com, GuruFocus.com, Valuewalk.com among others.

Tesla Stock Predictions

Summary

• Tesla’s autonomous car prospects will reap great rewards.
• Model 3 will sky-rocket the company’s sales
• I Know First is bullish for the mid and long term

Tesla Stock Predictions: Tesla (TSLA) has a habit of proving the bears wrong and burning short-sellers. Despite many concerns regarding its valuation, Tesla has sustained its lofty valuation. The company’s strong rise has been the fueled by its impressive revenue growth. And with the revenue growth expected to continue moving higher, there’s no reason to believe that Tesla will fail.

Tesla’s new car, the Model 3, has opened up many new growth avenues for the company. By targeting the mid-range car market, Tesla is increasing its target audience by a wide margin. Given that the Model 3 already has over 400,000 pre-orders, I think the stock should move higher in the near as well as the long-term. However, apart from the Model 3, Tesla has another big growth driver.

Levels of Cars

According to the United States National Highway Traffic Safety Administration, there are basically four levels of vehicle automation. The starting two levels are just the basic levels, whereas the last two levels come in the category of semi-autonomous and fully autonomous category.

First level includes features such as vehicle brake assist and electronic stability control. The second level includes more complex system that operates in cycles, like vehicle lane sensors that function with adaptive cruise control features.

The level three comprises of semi-autonomous features like a driver can pass total control to the car under definite traffic or environmental circumstances, but has to take back the control when the car is not able to handle a situation.

On the other hand, the most significant fully autonomous concept is intended to perform all safety-critical driving operations and monitor street conditions for the whole trip. These types of cars will merely need an endpoint and will drive to that point by itself, with or without driver. This idea was initially proposed by Google and is growing in popularity.

Why autonomous cars? 
Automakers may basically be moving towards the driverless car concept because they are being forced to contend with what the tech firms are manufacturing. But the main reason why governments and researchers are supporting this concept is for the reason that it will be much safer than human drivers.

It is projected that approximately 30,000 lives will be saved per year in just the U.S. alone as soon as autonomous cars become available in the market. As per a report from McKinsey, this figure accounts for 90 percent decline in car accidents and could possibly save the U.S. economy $190 billion in accident associated expenditures. Furthermore, driverless cars can save around 10 million lives each decade around the globe.

Tesla’s revolutionary CEO, Elon Musk, has been very vocal with his plans regarding autonomous cars and even claimed that the company will launch self-driving cars by 2018. While he may not deliver of his promise, investors can expect the company to grow its presence in the growing market.

500,000 unit sales target

To grasp a leading position, Tesla Motors has huge growth strategies. For starters, the company is targeting to sell half a million of its electric cars by 2020. In 2015, the company sold 50,580 cars; therefore, accomplishing 500,000 sales in 2020 would signify 58 percent CAGR over 5 years. However, with around 400,000 Model 3 reservations which Tesla already achieved, the company’s CEO Elon Musk aims to sell 500,000 units by 2018. This means that the company is now seeking for 115 percent CAGR over three years, and that is simply awesome.

Source: Benzinga

Speeding up the production of Model 3 to meet the surprisingly massive demand accounts for the main reason that shifted 500,000 unit sales mark from 2020 to 2018. If the company reaches their striving aim and endures to develop further than 2020, investors will probably see outstanding returns that may come faster than even Tesla bulls have anticipated.

Tesla’s Model 3 is designed to compete in contradiction of the BMW 3 Series and comparable high-end ‘D’ segment ICE cars. The company is certainly headed in the right direction to ramp Model 3 production as swiftly as possible because moving slow would be to relenting consumers to other players.

What Tesla learned

Tesla has a good chance to understand the mistakes encountered by Fisker Automotive and learn from its mistakes. Fisker Automotive made lots of mistakes that led the company to its bankruptcy. The most significant mistake among them was a catastrophe to engineer a dependable drivetrain while allocating more, resources, and energy into vehicle design. Fisker’s Karma was an amazing car in terms of looks, but they frequently broke down had problems manufacturing them.

In the case of EVs, there are several things which should be clear to the company before volume manufacturing. At a present stage, Tesla has the technology, design, and distribution down perfectly. Hence, it is the perfect time for the company to begin belligerently rustling auto administrators that have wide-ranging manufacturing experience and it is exactly what Tesla is doing.

Conclusion

Although Tesla is losing money at a rapid pace, I think Elon Musk is too smart to let the company go down in flames. Bankruptcy is certainly not an option for Tesla longs, and given its future prospects, I am confident about the stock going forward. Growing car sales along with the growth of autonomous vehicle market can push Tesla’s stock to over $300 in the next few years.

My bullish stance on TSLA is resonated by I Know First’s algorithmic forecasts. I Know First uses an advanced state of the art algorithm based on artificial intelligence and machine learning to foresee market performance for more than 7,000 assets including stock forecasts, world indices, commodities, interest rates, ETFs, and currencies.   The algorithm generates a forecast with a signal and a predictability indicator. The signal is the number at the center of the box. The predictability is the figure at the bottom of the box. At the top, a particular asset is identified. This format is standardized across all forecasts. The middle number indicates strength and direction, not a price target or percentage gain/loss. The bottom figure, the predictability, signifies a confidence level.

As seen from the chart above, the green 518.22 indicates that I Know First’s algorithm is strongly bullish on Tesla, thereby confirming my outlook for the stock.

In addition, I Know First Algorithm has previously predicted the stock movement of TSLA like in this Tech Forecast from February 18th to May 18th, 2016. With a signal of 11.13 and predictability of 0.54 TSLA managed to return 25.19% in 3 Months.