Al Root
Tesla stock just might be in the midst of its third "monster move." One thing needs to happen to keep shares moving higher, though.
"Using approximate numbers" shares gained about 1,850% between July 2010 lows and September 2014, said CappThesis founder and market technician Frank Cappelleri. They gained about 3,500% from June 2019 lows and November 2021.
Coming into this week, Tesla stock was up about 350% from the 2023 lows -- so far. "That suggests that this still could be the early stages of the stock's third monster move going back to 2010," added Cappelleri.
He isn't making a fundamental call on Tesla stock. Cappelleri studies stock charts and market history to get a sense of what investors are thinking -- and what they can do to stock prices.
Investors should take note of Tesla's history. Still, stock charts eventually have to reflect company fundamentals -- and vice versa.
That's what happened in the prior two rallies. "Monster moves" were accompanied by rising earnings estimates. In other words, the stock market got it right. Shares moved higher as the business was getting better.
The 2010 rally was the era of the Model S launch. The car proved that Tesla could manufacture high-quality, desirable all-electric cars. From 2010 to 2013, when the rally started to lose steam, Wall Street estimates for Tesla's 2013 earnings went from a loss to a small profit. Tesla ended up earning about a nickel a share in 2013.
The 2019 rally was the era of the Model Y. It, and the Model 3, proved Tesla could build millions of mass-market cars profitably. From 2019 to 2022, when that rally started to lose steam, Wall Street estimates for 2022 earnings per share went from about $1.40 to $4. Tesla earned a little more than $4 a share in 2022.
Looking ahead, Tesla is expected to earn about $5 a share in 2027 -- a few years from now. That number needs to rise for shares to keep working.
Tesla stock was up 2.7% in premarket trading at $452.30 while S&P 500 and Dow Jones Industrial Average futures were rising 0.4% and 0.3%, respectively.
Shares got hammered on Wednesday after Federal Reserve Chairman Jerome Powell indicated fewer rate cuts than investors expected in 2025. Tesla stock dropped 8.3% closing at $440.13 a share.
Still, Tesla stock hit a record intraday high on Wednesday at $488.54 a share. The stock gave up about $48, or 10%, as the market sold off late in the day.
Wednesday's move still left shares up almost 1% for the week. Coming into Thursday trading, Tesla stock was up about 77% so far this year and about 75% since the Nov. 5 U.S. presidential election.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 19, 2024 04:45 ET (09:45 GMT)
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