To The Moon

$Tesla Motors(TSLA)$ has always been a stock that sparks excitement and debate, and today is no exception. With shares hitting $398, many are wondering if we’re witnessing a repeat of Tesla’s 2020 meteoric rise, when the stock soared to its all-time high of $414.

The big question now is: Can Tesla break through $414 and chart new highs, or is this rally due for a correction? Let’s analyse Tesla’s current position, the factors driving its momentum, and share how I’m positioning for the rest of the year.

A Look Back: Tesla’s 2020 Rally

Tesla’s 2020 surge was nothing short of extraordinary. The stock benefitted from:

• Massive retail and institutional interest fuelled by its inclusion in the S&P 500.

• Breakthroughs in EV adoption globally, positioning Tesla as the industry leader.

• A “cult stock” status, driven by Elon Musk’s bold vision and a loyal retail investor base.

Fast forward to today, and while the macroeconomic backdrop has changed, some parallels are striking: Tesla is again riding a wave of enthusiasm, with a strong uptrend fuelled by improving fundamentals and market optimism. But is this rally built on a solid foundation, or are we entering speculative territory?

What’s Driving Tesla’s Recent Surge?

1. Improved Margins and Cost Control Tesla’s recent earnings highlighted its ability to maintain healthy gross margins despite price cuts. With scaling production in factories like Giga Texas and Berlin, the company has proven it can absorb these cuts and still thrive.

2. Cybertruck Anticipation The long-awaited Cybertruck is finally nearing delivery. While initial production numbers may be limited, its launch marks a new revenue stream and could reignite the hype machine around Tesla’s product innovation.

3. AI and Full Self-Driving (FSD) Optimism Tesla’s growing narrative as an AI-driven company is gaining traction, particularly with advancements in its FSD software. Investors see potential in Tesla’s transition from being an automaker to a tech company leveraging its autonomous driving ecosystem.

4. Macro Tailwinds for Growth Stocks With signs of easing inflation and potential rate cuts in 2024, growth stocks, particularly mega-caps like Tesla, are regaining favour. Tesla’s strong cash flow and leadership position in the EV market position it as a key beneficiary of this shift.

The Risks: Could This Rally Lose Steam?

While Tesla’s momentum is undeniable, there are risks to consider:

• Valuation Concerns: At nearly $400, Tesla trades at a lofty valuation, pricing in significant growth. If the company fails to deliver on its ambitious targets, the downside could be sharp.

• Competition Intensifies: Rivals like BYD, XPeng, and traditional automakers are ramping up their EV strategies, putting pressure on Tesla’s market share.

• Macro Volatility: A sudden spike in interest rates or macroeconomic instability could quickly shift market sentiment, dragging high-valuation stocks like Tesla lower.

Can Tesla Surpass $414 and Hit a New All-Time High?

Breaking $414 would require a mix of sustained investor enthusiasm, solid execution on upcoming product launches (like the Cybertruck), and perhaps a catalyst like strong Q4 delivery numbers or a major AI-related announcement.

If these factors align, I see Tesla reaching $450-$475 by December. However, if enthusiasm wanes or macro conditions deteriorate, a pullback to $350-$360 is equally plausible.

My Target Price for December

• Bullish Case: $450-$475 (Tesla breaks $414 with strong Q4 numbers, Cybertruck hype, and macro tailwinds).

• Base Case: $400-$420 (Tesla consolidates near $400, supported by steady growth but no major catalysts).

• Bearish Case: $350-$360 (Tesla retraces as valuation concerns and macro headwinds emerge).

How I’m Positioning Tesla

1. Short-Term Options – Straddle for Earnings Volatility

   To capture the potential volatility around year-end announcements, I’m considering a straddle options strategy. This allows me to profit whether Tesla breaks $414 or retraces.

2. Buying Dips – Support at $350-$360

   If Tesla dips below $360, I’d look to add to my position. This level represents strong technical support and a solid entry point for long-term investors.

3. Momentum Trade – Riding the Breakout

   If Tesla decisively breaks $414 with strong volume, I’d take a short-term momentum trade targeting $450.

Final Thoughts: A 2020 Moment?

Tesla’s journey to $400 is reminiscent of its meteoric rise in 2020, but the context today is different. While the growth narrative remains strong, Tesla is now a more mature company with higher expectations baked into its valuation.

For traders, the current setup offers plenty of opportunities—whether you’re riding the momentum or looking for a tactical pullback. For long-term investors, Tesla’s expanding ecosystem in EVs, AI, and energy makes it a must-watch stock, but disciplined entry points are key.

As always, trade with conviction, manage your risks, and keep your eye on the bigger picture.

Happy trading but please DYODD!