Given that the current valuations of Tesla (NASDAQ: TSLA) are completely detached from any financial fundamentals, is it far fetched to imagine that an analyst will target TSLA stock at $1,000 a share? I do not think it is out of the question. Like any delusional investment frenzy, the sky is the limit, until it is not.
Most financial bubbles observed over the course of human history tend to occur in stages as shown below. We have currently reached the Tesla investor "delusion" phase as shown in the bubble stage chart. Now the media and fanatical bulls are about to enter the "New Paradigm" and "Denial" phase as investment bankers and enthusiastic investors tout the Tesla technology as above the laws of basic economics and finance and seem to believe and that no other competitors can possible enter the EV market to drive down profits. When investment institutions start to book profits and exit out at these inflated stock levels it will leave the latest buyers in the "bull trap" section of the bubble chart right before the bottom falls out.
Can Tesla continue the stratospheric rise over the next twelve months? It is anyone's guess, but the latest buyers might think twice about a buy and hold strategy as they are the last one's in. Tesla's stock price rise is comparable to the Tulip Bulb charts in 1636 and Tesla will eventually fall to realistic prices based on basic stock fundamentals.
Two year price trajectory charts of Tulips(circa 1636-37) and Tesla are eerily similar. The Tulip Mania is worth noting not because the Tesla Electric Vehicle's are similar to a flower bulb but because it shows that any asset can be bid up to ridiculous levels.
Stifel Nicolaus analyst, James Albertine, targeted TSLA's stock price at $400 per share based on the following observations:
- The current manufacturing facilities can be expanded to produce 1,000 units a month from 800 units a month after an impressive walk through
- Albertine's analysis of Investor Exuberance as stated in the revised target price:
"TSLA sentiment is like a freight train, in our view, benefiting from a well manicured growth story that has caught the eye of a much broader investor base relative to most auto stocks,"
Conclusion: I am not a profession stock analyst but I believe that statement above by Albertine reveals a target price based on an investor herd mentality more than solid financial fundamentals and analysis. It is Time to buy long-term put options with January or March 2015 expirations for a solid gain while avoiding the short-term frenzied volatility.
Disclosure: The author is short TSLA.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.