Should you buy Tesla shares as Wedbush sees upside to $1,400?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Nov 19, 2021
  • Tesla shares on Friday edged slightly higher after receiving a rating upgrade from Wedbush.
  • The firm upgraded the stock to buy from neutral and raised its price target to $1,400 from $1,100.
  • Analyst Dan Ives thinks TSLA could claim $2.5 trillion of the $5 trillion of the auto/software-driven market.

On Friday, Tesla Inc. (NASDAQ:TSLA) shares edged slightly higher after receiving a rating upgrade from Wedbush Securities. The firm upgraded TSLA’s rating to buy from neutral, assigning a price target of $1,400 from $1,100. Analyst Dan Ives cited the company’s dominance in the electric vehicles market as a major catalyst.

Ives thinks Tesla could claim $2.5 trillion of the $5 trillion auto/software-driven market. The analyst estimates that the Chinese opportunity could contribute $400 per share to the stock price in 2022, which pushes his bull-case price target to $1,800. 

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Tesla shares have pulled back more than 9% since the 4th of November. However, the stock is still up more than 51% this year, thus outperforming the S&P 500 Index.

Tesla’s growth opportunity

Given the exciting opportunity from the Chinese EV market, analysts now expect Tesla’s earnings per share to spike by more than 165% this year, before rising at an annual rate of about 73% over the next five years.

Therefore, Tesla is one of the best growth stocks in the auto industry, thus making it an exciting option for long-term investors.

From a valuation perspective, the stock trades at steep trailing 12-month P/E and forward P/E ratios of 355.74 and 135.71, respectively. As a result, value investors could opt for alternatives in the market.

Source – TradingView

Technically, Tesla shares seem to have recently advanced to complete a channel breakout from a sharply descending channel formation. As a result, the stock has surged closer to the overbought conditions of the 14-day RSI.

Therefore, investors could target potential short-term pullbacks at about $955.61, or lower at $788.05, while $1,247 and $1,402 are crucial resistance zones.

The pullback could be an opportunity to buy

In summary, although Tesla shares trade at steep valuation multiples, the stock offers exciting growth prospects, making it an ideal choice for investors willing to overlook the short-term turbulence.

Therefore, the recent pullback could be an opportunity to buy ahead of a potential rebound.

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