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Stocks  | December 12, 2019

Tesla (TSLA) is the IBD Stock Of The Day, as shares climbed Tuesday after a German newspaper reported the company aimed to produce 500,000 electric vehicles a year at its plant in Brandenburg, Germany.

Tesla stock rose 1.1% to close at 352.70 on the stock market today, the fourth straight day of gains for the electric-car maker.

After a lengthy consolidation, Tesla stock is near a buy point of 361.30, with the buy range going up to 379.36. The consolidation started about one year ago, hitting a bottom at 179.99 in June. That's a drop of 53%, much deeper than a desired decline in the range of 30% to 35%. But Tesla stock fought back and has doubled since then.

Tesla stock has a history of being erratic, with its mercurial Chief Executive Elon Musk frequently drawing attention with bold claims about production and profitability that have been a challenge for analysts to discern.

Tesla Stock: Production In China, Germany

Last month, Tesla announced that a site in Brandenburg was chosen to build Tesla Model 3 and Model Y vehicles. According to a report by Germany-based Bild, Tesla plans to invest about $4.4 billion into the plant. Construction is scheduled to start in 2020 and create 10,000 jobs, according to the report. Tesla declined to comment on the article.

The report comes as Tesla is building trial-production units of the Model 3 at its new factory in Shanghai, China. The facility is already under construction, though Tesla has not yet said when car production will begin. It will be Tesla's first full-scale production plant outside of its Fremont, Calif., operation.

Morgan Stanley's Adam Jonas thinks Tesla could sell 250,000 Model 3 vehicles in China by 2025. But in a bull-case scenario, Jonas ups that to 450,000.

Tesla has a goal to produce 360,000 to 400,000 vehicles this year, an increase of 60% to 80% vs. a year ago.

Analyst Rating On Tesla Stock

In a report on Tesla last week, Jonas maintained his cautious view overall on Tesla. He raised a bullish, high-end estimate on Tesla stock to 500 from 440. That's about 40% above where Tesla stock currently trades.

But Jonas maintained his central price target at 250 on Tesla stock, with a rating of "equal rate."

The market for all-electric vehicles is intensifying, with General Motors (GM), Ford Motor (F) and Fiat Chrysler Automotive (FCAU) moving deeper into the territory.

Last month, Tesla debuted its futuristic Cybertruck to mixed reviews.

"The radical design will likely be a point of discussion," Baird analyst Ben Kallo said in a note to clients. "But over time we expect impressive features will win over a larger audience."

On Wednesday, auto information provider Edmunds named the Tesla Model 3 its top-rated electric vehicle.

Tesla Shows Unexpected Profit

Tesla stock is up about 39% since the company reported third-quarter earnings on Oct. 23 that showed an unexpected profit, with a slight miss on revenue. Company officials attributed the swing to profitability in Tesla earnings to a reduction in costs.

In a letter to shareholders, the company said operating expenses are at their lowest level since the company started producing its lower-end Model 3 for mass sales in 2017.

The IBD Stock Checkup Tool shows that Tesla has an IBD Composite Rating of 75 out of a best-possible 99. The rating means Tesla stock currently outperforms 75% of all stocks in terms of the most important fundamental and technical stock-picking criteria

It has a Relative Strength Rating of 94 out of 99. The rating tracks market leadership by showing how a stock's price movement over the past 52 weeks measures up against that of the other stocks.

It has a weak EPS Rating of 25, which compares quarterly and annual earnings-per-share growth with all other stocks.

How Tesla Rates Among Peers

The company currently holds the No. 4 ranking among its peers in IBD's Auto Manufacturing industry group. Ferrari (RACE) is No. 1 in the group, followed by Toyota Motor (TM), then Fiat Chrysler.

The group ranks a strong No. 6 among 197 industry groups in recent performance.

In the stock market, timing is critical. So when you're looking for stocks to buy or sell, it's important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.


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