Why Tesla's Stock Roared Back to Life Today

view original post

© Provided by The Motley Fool Why Tesla’s Stock Roared Back to Life Today

What happened

At first, it looked like Wednesday was going to be another awful day for Tesla (NASDAQ: TSLA). Mere seconds after trading began, this purported growth stock was down another 3.5% as investors continued to try to front-run an anticipated sale by CEO Elon Musk of 10% of his Tesla shares.

That’s the bad news. The good news is that Bank of America just stepped in to save the day for Tesla investors. As of 9:45 a.m. EST, the stock is up 3% — and climbing.

© Getty Images Lights streak down a red car racing down the highway.

So what

Why? Well to begin with, Bank of America took advantage of the recent sell-off to set a new and improved price target on Tesla this morning — $1,200 a share, up from $1,000 a share previously. On the one hand, BofA’s new valuation sounds ambitious. The banker says it’s valuing Tesla at 21 times next year’s sales, reports StreetInsider.com, and at a staggering 106 times next year’s earnings before interest, taxes, depreciation, and amortization (EBITDA).

Load Error

On the other hand, though, Tesla is growing so fast that by the time 2025 rolls around, BofA says its $1,200 target price will be a mere four times sales, and only 21 times EBITDA.

Now what

Can Tesla grow into its new valuation like Bank of America predicts? Perhaps. In a new report out just this morning, Reuters points out that Tesla “is selling virtually every vehicle it can build and is readying new multibillion-dollar ‘gigafactories’ near Berlin and Austin that will significantly boost its annual production capacity.”  

The company is at the leading edge of a tidal wave of investment in electric cars and rechargeable batteries, which will see $515 billion invested globally through 2030, says the news agency — 75% more than was anticipated less than three years ago. Around the world, car companies are now committed to “shift away from combustion engines” — and Tesla was the first company to shift gears in this direction.

This, in a nutshell, is why Tesla stock is now valued at “more than twice the combined value of Volkswagen AG, Toyota Motor Corp, Ford Motor Co and General Motors Co” — and it’s why Tesla stock is going back up today.

SPONSORED:

Find out why Tesla is one of the 10 best stocks to buy now

Our award-winning analyst team has spent more than a decade beating the market. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed their ten top stock picks for investors to buy right now. Tesla is on the list — but there are nine others you may be overlooking.

Click here to get access to the full list!

 

*Stock Advisor returns as of October 20, 2021

 

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla and Volkswagen AG. The Motley Fool has a disclosure policy.

Continue Reading