Volkswagen Expects 90% Electric Car Sales in 2021; Target Price $159

Volkswagen AG, a German multinational automotive manufacturing company, said on Wednesday that its electric car sales will probably account 90% of total sales in Norway in 2021 and replace polluting petrol and diesel engines by 2023, Reuters reported citing the auto maker’s local importer.

An all-time high 61.5% of new cars sold in Norway in September were powered by fully electric engines, registration data showed, up from 42.4% last year. The debut in September of Volkswagen’s highly anticipated ID.3 model vaulted it to the top of the Norwegian sales ranking, outselling California-based Tesla‘s Model 3 and Geely‘s Polestar 2 from China, according to the Norwegian Road Federation, Reuters reported.

At the time of writing, Volkswagen’s shares traded 1.43% to EUR139.44 on Wednesday; however, the stock is down over 20% so far this year.

Volkswagen stock forecast

Fourteen analysts forecast the average price in 12 months at EUR 159.31 with a high forecast of EUR 190.00 and a low forecast of EUR 135.00. The average price target represents a 15.72% increase from the last price of EUR 137.67. From those 14, nine analysts rated “Buy”, three rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley target price is EUR 135 with a high of EUR 180 under a bull scenario and EUR 90 under the worst-case scenario. Volkswagen has been assigned a EUR 145 target price by stock analysts at Jefferies Financial Group. The firm presently has a “neutral” rating on the stock.

Other equity analysts also recently updated their stock outlook. Barclays set a EUR 155 price target and gave the company a “buy” rating. Deutsche Bank set a EUR 170 price target and gave the company a “buy” rating. Royal Bank of Canada set a EUR 175 price target and gave the company a “buy” rating. Warburg Research set a EUR 190 price target and gave the company a “buy” rating. At last, Nord/LB set a EUR 135 price objective and gave the company a “neutral” rating.

Analyst view

“Volkswagen (VW) is the No. 1 global auto OEM. Strong positioning, a strong SUV model cycle, and improved cost management have all supported the recent earnings streams. The upside is capped by peak cycle demand, slowing China demand, European cycle risks, and European and global emissions legislation forcing VW to reduce CO2 and accelerate BEV development,” said Harald Hendrikse, equity analyst at Morgan Stanley.

“Volkswagen is the leading BEV legacy OEM -but it remains a very small proportion of sales and capital, with a very large legacy cost base. Ex FY20E, EPS has been near record highs, and VW remains the consensual Buy in the European sector for now. On lower FY20E EPS, valuation is not cheap.”

Upside and Downside risks

Upside: 1) Volkswagen margins and FCF recover more fully in FY21E than we forecast. 2) BEV sales accelerate more sharply in FY21E. 3) Volkswagen’s rating starts to reflect some BEV sustainability as BEV sales accelerate – highlighted by Morgan Stanley.

Downside: 1) Emissions regulations impact through further regulatory fines & or other liabilities. 2) Sharp decline in global demand/pricing could undermine margins more significantly.

Tesla Sells Off Despite Strong Q3 Deliveries

Tesla Inc. (TSLA) fell more than 7% in Friday’s U.S session, closing at the weekly low, after quarterly delivery numbers failed to beat recently raised expectations. The company delivered 124K Model 3s and 139.3K total vehicles during the third quarter, slightly above consensus of 122K and 136K, respectively. However, CEO Elon Musk had primed expectations prior to the release, leaking metrics to industry publication Electrek that suggested even stronger results.

Musk Promotion Efforts Backfire

Musk’s attempts to manage investor expectations and stoke buying interest have backfired in recent weeks. In addition to Friday’s tumble, the stock tanked just one day after the highly anticipated 5-for-1 stock split at the end of August, trapping late-to-the-party shareholders in a 34% 5-day decline.  It dropped like a rock once again when the colorful CEO admitted the highly-touted ‘Battery Day’ on Sept. 23 would not feature a game-changing announcement.

Canaccord Genuity analyst Jed Dorsheimer agreed that Tesla results will come as a “material disappointment” to bulls, “effectively cementing a miss” to the 500K annual guidance. He also warned that Q4 guidance is now at risk, noting “current consensus of 480K for 2020 would put the Q4 bar at 161K deliveries. As we look at 161K for Q4 to meet Street, it would suggest delivery figures are likely to come down and thus a risk of lowering expectations generally across the board”.

Wall Street And Technical Outlook

Wall Street has grown extremely cautious about Tesla’s lofty stock price and high valuation, issuing a consensus ‘Hold’ rating comprised from 6 ‘Buy’, 14 ‘Hold’, and a phenomenal 10 ‘Sell’ recommendations. Price targets currently range from a low of $19 to a street-high $566 while the stock closed Friday’s session $109 above the median $302 target. This placement raises odds for a high-percentage decline if Oct. 21 earnings fail to exceed expectations.

Tesla posted an all-time high at 502 on the first trading day of September and rolled into a symmetrical triangle pattern that’s now carved two lower highs and one higher low. A selloff to 370 would reach range support once again, potentially triggering another upturn. However, the lows have narrowly-aligned with 50-day moving average support, warning that a breakdown would expose further downside into the 200-day moving average, now crossing the 240 level.

For a look at all of today’s economic events, check out our economic calendar.

Tesla Delivered Record 139,300 Vehicles in Q3; Shares Could Plunge Over 30% to $302

Tesla Inc, an American electric vehicle and clean energy company based in California, said on Friday that it produced just over 145,000 vehicles and delivered a record 139,300 vehicles in the third quarter, shrugging off the good news shares fell over 5% in pre-market trading.

The manufacturer of high-performance electric vehicles slightly beats the market consensus of 134,720 vehicles deliveries.

Tesla delivered 124,100 units of its new Model Y sport utility vehicle and Model 3 vehicles in the period as U.S. production recovered after being suspended from the end of March to early May due to the COVID-19 lockdown. That was below expectations of 128,000 Model 3 and Model Y vehicles combined, Reuters reported.

Tesla’s shares closed flat at $448.16 on Thursday; the stock is also up over 400% so far this year. However, it plunged 5.61% to $423.03 in pre-market trading on Friday.

Tesla stock forecast

Thirty analysts forecast the average price in 12 months at $302.56 with a high forecast of $566.00 and a low forecast of $19.00. The average price target represents a -32.49% decrease from the last price of $448.16. From those 30, six analysts rated ‘Buy’, 14 analysts rated ‘Hold’ and ten rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $272 with a high of $527 under a bull scenario and $102 under the worst-case scenario. Tesla has been assigned a $400 price objective by stock analysts at Credit Suisse Group. The brokerage currently has a “neutral” rating on the electric vehicle producer’s stock.

Several other equity analysts have also updated their stock outlook. DZ Bank reissued a “sell” rating on shares of Tesla. Jefferies Financial Group reissued a “buy” rating. At last, Cfra raised shares of Tesla from a “sell” rating to a “buy” rating.

Analyst comment

“We are positive on Tesla’s leadership across: EVs, Batteries & FSD and see an opportunity for TSLA to further penetrate these key TAMs. Why not OW? At its current valuation, we believe the market has already discounted a large part of Tesla’s growth potential. Further, competition in the EV market continues to intensify from traditional OEMs, startups & mega-tech firms,” said Adam Jonas, equity analyst at Morgan Stanley.

“We also continue to harbour concerns over the long-term efficacy of an auto business commercializing advanced tech that is economically sensitive within China. As Tesla expands production, they will likely need to raise more capital. While there is a strong appetite in the short-term, it will dilute shareholders in the long run,” he added.

Upside and Downside Risks

Upside: 1) Tesla China profitability surprises to the upside. 2) Europe Giga success. 3) Model Y margin accretion. 4) Software margin accretion. 5) Tesla the Supplier? 6) Cybertruck, highlighted by Morgan Stanley.

Downside: 1) May never make the leap to a shared mobility model, limiting itself to niche OEM status. 2) Execution risk / COVID-19. 3) Openness of capital markets to funding Tesla’s strategic ambitions. 4) Large & better-capitalized technology firms emerging as competitors.

LG Chem Shares Jump Over 4% After Report of Tesla’s Interest in Battery Unit; Target Price KRW 800,000

LG Chem Ltd, which is the most diversified and vertically integrated chemical company, climbed over 4% on Tuesday following a media report that Tesla was interested to buy a stake in a battery unit the South Korean company wants to dispose off, Reuters reported.

“Tesla is said to be exploring taking up to a 10% stake in LG Energy Solution,” the Korea Times reported.

“While China’s CATL is also one of the top battery suppliers to Tesla, given Tesla’s deep partnership with Panasonic, Tesla’s equity purchase of LG Energy Solution would come and it’s no surprise to see that,” one of the Times’ sources added.

Following this announcement, the company which supplies batteries to Tesla, LG Chem shares ended 4.5% higher on Tuesday. The stock is up over 100% so far this year.

LG Chem stock forecast and analyst views

Morgan Stanley target price is W800,000 with a high of W1,000,000 under a bull scenario and W580,000 under the worst-case scenario.

The investment bank said “W800,000: base case value, sum of the parts valuation in view of LGC’s various business segments. We apply target EV/EBITDA multiples, based on average peer comparisons, to 2021e EBITDA. Peers have been selected considering similar product profile, customer bases, growth prospects and geographic operations to LG Chem’s.”

“Risk-reward now more attractive: Despite our constructive view on LGC’s EV battery business outlook, valuation was the primary reason for our prior downgrade. However, after a correction from the peak, we believe its valuation has turned more attractive,” said Young Suk Shin, equity analyst at Morgan Stanley.

“We believe the shares have reflected some of the key overhangs (Tesla Battery Day, split-off announcement, litigation) while another round of earnings estimate increases should also make its risk-reward profile even more appealing. Time to reengage: With P/B back to +1SD from average (since 2011), valuation is still not cheap; but as we expect robust battery earnings growth, we see room for further upside,” Suk Shin added.

Upside and Downside Risks

Upside: 1) Stronger-than-expected EV sales/penetration in the EU. 2) Stronger cylindrical battery sales in China. 3) Improving macro environment for chemical demand, highlighted by Morgan Stanley.

Downside: 1) Yield issues at the EV battery plant in Poland. 2) Intensified competition in the EV battery market. 3) Worsening macro environment for chemical demand.

Tesla: Lithium Phase

Tesla signed a 5-year deal to take lithium from Piedmont – in addition to its other plan to extract the metal in Nevada. Piedmont’s stock surged by almost 300%. Tesla’s stock is still in a downturn though.

The daily chart below shows that Tesla is consolidating around the current level of $420. The heights of $500 were left in the dust a month ago but may turn into a bullish target soon – once we see the downtrend capping the upside broken. In the long-term, it’s unlikely that Tesla will go down because fundamentally, it keeps expanding its horizons. Even though its P/E ratio is way beyond 20 as Warren Buffett liked to warn, the business outlook for Elon Musk’s business looks positive and full of opportunities. And sales – including in China. So let’s wait where the bottleneck of the current fluctuation to exhaust and see where the stock goes.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice. 

Tesla Stock Price Crash Update

Tesla stock prices rebounded into yesterday’s battery day. I think the rebound is over, and a breakdown below $329.88 could trigger a sharp collapse to $180 – $220 before the next multi-week bounce. Longer-term, I continue to target a drop below $75.00.

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Currently, I do not own TSLA – I’m very bullish long-term.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

U.S. Stocks Set To Open Higher As Nike Smashes Earnings Estimates

Nike Easily Beats Earnings Estimates

S&P 500 futures are up in premarket trading as traders cheer great results from Nike which beat estimates on both earnings and revenue.

Nike reported revenue of $10.6 billion and GAAP earnings of $0.95 per share which were much higher than the analyst consensus which called for revenue of $9.15 billion and earnings of $0.48 per share.

Nike achieved strong growth in its online sales and managed to offset the negative impact of the coronavirus pandemic. Not surprisingly, Nike shares are gaining more than 10% in premarket trading and look ready to open at all-time highs.

Tesla Set To Open Lower As ‘Battery Day’ Failed To Live Up To High Expectations

Tesla shares are down by about 5% in premarket trading as investors were disappointed to hear that they will have to wait several years for new batteries.

In addition, Elon Musk did not offer any specific guidance on the cost and the driving range of the new batteries.

He stated that Tesla could produce a $25,000 car that would be ready to compete with comparable gasoline cars in three years, but investors clearly wanted him to be more specific.

Tesla shares are up more than 400% year-to-date so it was really hard to live up to such high expectations. That said, a continuation of correction in Tesla shares may put some pressure on investor mood in other high-flying tech stocks.

All Eyes On PMI Reports

Today, the U.S. will provide flash readings of Manufacturing PMI and Services PMI for September. Manufacturing PMI is expected to stay unchanged at 53.1 while Services PMI is projected to decline from 55 to 54.7.

PMI reports from other parts of the world indicated that the market should be ready for a negative surprise on the services side. In Euro Area, Services PMI declined from 50.5 in August to 47.6 in September.

Numbers below 50 show contraction so it is clear that Euro Area services segment is already suffering from the second wave of coronavirus. In the UK, Services PMI declined from 58.8 to 55.1.

If the U.S. Services PMI report is better than expected, stocks may get additional support. In the opposite case, the market may find itself under pressure due to worries about the sustainability of economic recovery.

For a look at all of today’s economic events, check out our economic calendar.

Will Tesla Deliver on “Battery Day” Hype?

For months, CEO Elon Musk has been teasing the world about the company’s potentially game-changing developments in battery technology. Even as recently as September 11th, he tweeted saying that “many exciting things” will be announced at the event. Such has been the excitement that Tesla has even become the world’s most-read about company over the past one month!

And so far this month, shareholders have been taken on a wild ride. Since Tesla posted a record high on August 31st, which also coincided with its 5-for-1 stock split, its stock has been buffeted by moves either way that averaged over six percent per trading day. Despite the volatility, Tesla’s market cap is still 437.12 percent higher compared to the start of the year!

What’s so exciting about a battery?

Investors are now speculating that the world’s largest maker of electric vehicles (EV) could unveil their “Million-Mile” battery on Tuesday. This is a monumental development, given that the batteries that are currently in Tesla vehicles has a warranty that lasts 150,000 miles or eight years, whichever comes first.

You would clock up a million miles if you circled the globe 50 times! However, before you get your hopes up over such a feat, although the million-mile battery promises to hold up during the journey, the other parts of the car would likely wear off well before you can conclude such an epic road trip.

Still, EV makers have taken giant strides in bringing down the cost of these batteries, chipping away at the premium over their counterparts with internal combustion engines. Although the battery accounts for roughly about half the total EV’s cost at present, it is expected to make up just 20 percent of the total EVs cost by 2025, according to a BloombergNEF estimates.

The US Department of Energy has also set out a target to ultimately lower the cost of EV batteries down to $80/kWh. Such a benchmark would guide investor expectations on Tuesday, and they’ll be eager to see if Musk could even announce cost parity for its batteries, while gleaming for clues over Tesla’s road map towards incorporating these new batteries into its production vehicles.

Ultimately, any major improvements to this crucial component in electric vehicles could make the cars more affordable, boost the company’s fundamentals, and potentially even whip up more positive sentiment towards Tesla’s stocks.

Musk to markets: Hold your horses

Aware of the risk of misaligned expectations, Musk has already, pre-emptively, poured some cold water on the frothing frenzy.

On the eve of “Battery Day”, he tweeted that whatever Tesla announces on Tuesday “will not reach serious high-volume production until 2022”, while still aiming to ramp up battery cell purchases from its partners such as Panasonic, LG and CATL. He also forecasted “significant shortages” beyond the next two years, unless Tesla also takes action themselves.

The pair of tweets injected another bout of volatility into Tesla’s shares, which fell by as much as 8.4 percent in extended trading, after posting two consecutive days of gains during the regular session.

So, all that remains is to be seen now is whether months of pent-up hype, surging stock valuations, and a rumour mill that’s gone into overdrive will reach a climatic ending on “Battery Day”, or risk disappointing shareholders into booking their profits and heading for the exit door.

Written on 09/22/20 08:00 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM


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Gold Forecast – Are You Ready for The Bubble in Gold?

Asset bubbles are a repeating theme. In 2017, bitcoin entered a bubble driving prices from $1000 to $19,000. The recent Bubble in Tesla marked a rally from $70 (post-split price) to over $500 in less than 6-months. Our work supports a bubble in gold and precious metals later this decade. This article will explore the various aspects of a bubble and how one could prepare.

Below are the three ingredients often associated with bubbles.

  1. A disruptive force that triggers speculation.
  2. A believable story that gains mass appeal.
  3. Widespread adoption and the fear of missing out.

Disruptive Forces

The internet fueled the 1990s Dot.com bubble. Blockchain technology stoked Bitcoin, and the Electric Vehicle (EV) revolution triggered the recent bubble in Tesla. Next, I believe a global currency crisis could trigger a bubble in gold that sends prices to unthinkable levels.   

Governments around the world have made it clear they will continue to print money. Eventually, they will have no choice but to default and restructure their debt. A new monetary system (likely digital) will emerge, and I believe this will be the driving force behind the bubble in gold.

Velocity of Money

Inflation and supply shortages will only get worse. In the latter phase of the monetary crisis, the velocity of money will increase sharply. Instead of hoarding currency, people will spend their dollars quickly – fearing widespread shortages and higher prices.

Physical Bullion Coins

Finding quality bullion products could become difficult. Partly because of resource shortages but more likely because of a demand shock. What is a demand shock? That is when a rapid influx in demand overwhelms supply for months or even years. Any supply that hits the market is quickly gobbled up – no matter how high the price. We are seeing some of this now.

I prefer government minted coins over bars or rounds. Why? They are recognizable and harder to counterfeit. There will likely be numerous fake coins and bars circulating near the end of the bubble – you will want to have something dealers and individuals recognize and trust.

When to Sell

Timing the exact top of a bubble is difficult. Towards the end, prices will often double in a month or less. People who have never bought gold or silver will be panicking to get some (fear of missing out). You will overhear conversations in the grocery store about a mining stock or a new “gold-backed” cryptocurrency…that is when you know we are getting close. I spotted the final bubble phase in Bitcoin and Tesla about two weeks before they peaked.

How to Prepare

I prefer a long-term accumulation strategy – trying to trade volatile markets is a recipe for disaster. Sure, you may have a good trade here or there, but eventually, you are going to get stung. I learned this the hard way. After adopting my long-term approach, I sleep better at night and have almost zero stress. Our gold cycle indicator was designed for just this.

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Conclusion

I think gold will enter a bubble later this decade – it probably won’t be until after 2024, so you have time to prepare. Consider physical metals and try to reduce stress. You may find our Premium educational metals portfolio helpful.

For a look at all of today’s economic events, check out our economic calendar.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information visit here.

Tesla Stock Crash Targets $75.00

In my article, Will Tesla Stock Price Crash, I laid out the likelihood for a 50%+ decline. Tesla shares peaked just after the stock split, and the initial breakdown is underway. I don’t foresee a bottom until prices drop below $75.00 in 2021.

TSLA DAILY CHART: Tesla peaked just after the stock split, as I suspected. The initial crash is underway, and prices could test the 200-day MA (currently $182.94) before the next multi-week bounce. Longer-term, we expect prices to remain under pressure into 2021 and 2022 before prices carve out a bottom below $75.00.

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I am very bullish on Tesla longer-term and believe it could become the next Apple. Currently, I do not own the stock.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

 

Tesla Under Pressure After SP-500 Snub

Tesla Inc. (TSLA) fell 130 points, or about 26%, after posting an all-time high at 502.49 on Tuesday, battered by a broad-based tech selloff and bull trap following the stock’s 5-for 1 split on Monday morning. CEO Elon Musk’s controversial electric vehicle manufacturer sold off another 6% in Friday’s post-market after an SP-500 committee defied popular opinion, choosing not to add the $390 billion company to the venerable index.

Tesla Share Games

The stock topped out and reversed on Tuesday after Musk tried to capitalize on historic gains with a secondary offering of up to $5 billion. Public offerings typically yield lower prices because they attract less experienced investors while diluting share value, encouraging smart money to step in and trade against them. Along with the recent split, market watchers are shaking their collective heads, recalling similar games in the heyday of the Internet bubble in the 1990s.

The decision will have an immediate impact on buying power because SP-500 membership would have forced tracking funds to buy more than 120 million shares of Tesla stock. Index components must have a market cap of more than $8.2 billion and report four profitable quarters in a row, according to standard accounting principles. The company has come under persistent criticism from skeptics who insist that profits rely on accounting tricks and these alleged practices may have been factored into the exclusion.

Wall Street And Technical Outlook

Wall Street consensus highlights major caution about the long-term outlook, with a ‘Hold’ rating based upon 5 ‘Buy’ and 15 ‘Hold’ recommendations. Ten analysts, or one-third of the total, recommend that shareholders take profits and move to the sidelines at this time. Price targets currently range from a low of just $17.40 to a ‘street-high’ $566 while the stock closed Friday’s U.S. session $126 above the median $292 target.

Tesla may have completed an Elliott 5-wave pattern off the June 2019 low, raising odds for an intermediate correction or bearish change in trend. However, it could be weeks or months before the technical outlook becomes more transparent because, despite last week’s downside, the stock has not broken short-term support levels. That could change if the SP-500 exclusion drops price through Friday’s low at 372 when U.S. markets reopen following the Labor Day holiday.

Telsa Stock Price Crash Update

A week ago, I penned an article titled, Will Tesla Stock Price Crash? I felt prices were in a bubble that could pop any day, probably around the time of the coveted stock-split.

I have often compared Tesla to the chart of Apple during the late 1990s. Studying the final parabolic advance in APPL reveals a potential price target for TSLA, if price crash as I suspect.

AAPL CHART (1984 – 2004)

The late 1990s parabolic run in Apple to new all-time highs unfolded in a power 3-wave (ABC) 10x advance. Prices peaked at C and then crashed below the terminal parabolic starting point of B. I expect something similar in Tesla.

TSLA (2012 – NOW)

Expecting a repeat of Apple’s post-bubble crash – Tesla could collapse below $75.00 before starting the next major advance. In my opinion, that could present the buying opportunity of a lifetime…if you want to own Tesla.

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Here is what happened to Apple’s chart once prices bottomed in “D.”

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AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

Tesla Announces its Biggest Capital Raise of $5 Billion Amid Sharp Rally

Tesla Inc, an American electric vehicle and clean energy company based in California, announced to raise $5 billion capital in new share sales to ease some future debt burden, taking advantage of its recent rally in stocks and soaring investors’ interest.

The largest company in the U.S. by revenue said in a filing with the Securities and Exchange Commission that the extra shares will be sold “from time to time” and “at-the-market” prices.

“We intend to use the net proceeds, if any, from this offering to further strengthen our balance sheet, as well as for general corporate purposes,” Tesla said, reported by CNBC.

This move comes just a day after a stock split of five-for-one brought into play. In February, Tesla had announced plans to raise $2 billion in a stock offering.

Tesla shares have gained more than 500% so far this year; it rose over 7% in pre-market trading on Tuesday.

Tesla stock forecast

Thirty analysts forecast the average price in 12 months at $278.84 with a high forecast of $566.00 and a low forecast of $17.40. The average price target represents a -41.54% decrease from the last price of $477.00. From those 30 analysts, four rated “Buy”, 15 rated “Hold” and 11 rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $272 with a high of $527 under a bull-case scenario and $102 under the worst-case scenario. Independent Research lowered their target price to $109.00 from $540.00.

Other equity analysts also recently updated their stock outlook. Canaccord Genuity raised the target price to $442 from $325, Jefferies upped their price target to $2500 from $1200 and Wedbush increased their stock price forecast to $1900 from $1800.

Analyst view

“We are positive on Tesla’s leadership across: EVs, Batteries & FSD and see an opportunity for TSLA to further penetrate these key TAMs. Why not OW? At its current valuation, we believe the market has already discounted a large part of Tesla’s growth potential. Further, competition in the EV market continues to intensify from traditional OEMs, startups & mega-tech firms,” said Adam Jonas, equity analyst at Morgan Stanley.

“We also continue to harbour concerns over the long-term efficacy of an auto business commercializing advanced tech that is economically sensitive within China. As Tesla expands production, they will likely need to raise more capital. While there is a strong appetite in the short-term, it will dilute shareholders in the long-run,” he added.

Upside and Downside risks

Upside: 1) Tesla China profitability surprises to the upside. 2) Europe Giga success Model Y margin accretion. 3)  Software margin accretion. 4) Tesla the Supplier? 5) Cybertruck – highlighted Morgan Stanley.

Downside: 1) May never make the leap to a shared mobility model, limiting itself to niche OEM status. 2) Execution risk / COVID-19. 3) The openness of capital markets to funding Tesla’s strategic ambitions. 4) Large & better capitalized technology firms emerging as competitors.

Blame it on The Nasdaq

US data announced this week showed a significant recovery in building permits and housing, building permits (MoM) for July surged to 18.8% compared to the previous 3.5%, Housing Starts data revealed 22.6% which is 5.1% higher than the previous month, existing-home sales data were as well positive reported beyond expectations.

Despite the negative Jobless claims and Philadelphia Fed Manufacturing PMI reported on August 20, Manufacturing PMI and Services PMI demonstrated a significant improvement, which led major US Indices to surge whereas S&P500 and Nasdaq100 reached the all-time high.

US stocks continue hitting records, Tesla surged by 24.19% breaking the significant $2000 per share value, and is now worth more than $382 billion surpassing Walmart by nearly $10B. Nasdaq’s top company by market cap – Apple gained 8.23% hitting the $2127B in capitalization. Tesla and Apple remain the top popular shares last week based on Robinhood data.

S&P500 closed above the all-time high, some might think that there is a possible double top pattern, economic recovery of the US indicates that the index may continue the run towards $3500.

Nasdaq owes its gains not only to Tesla and Apple, but there are also other tech companies that surged last week and during the pandemic, such as NVIDIA, AMD, Qualcomm, Microchip Tech, Texas Instruments.

An hourly chart demonstrates that the correction is most likely will happen as the price touched the dynamic resistance and the fifth wave of an ending diagonal is about to complete at 11600. Ending diagonal is a trend reversal pattern, which usually demonstrates exhaustion of bulls, note the evening star doji, though the closing is above the previous close, it still shows uncertainty and exhaustion.

NDX chart by TradingView

How is it related to cryptocurrencies and Bitcoin?

Bitcoin and Ethereum price actions are considered as cryptocurrency market movers. Since Bitcoin is nowadays considered as the digital Gold and Ethereum as a digital Silver, their price action now is correlated to US data which effect Gold. Gold was ever since used as a safe-haven to hedge funds during the uncertain times and inflation, so is Bitcoin now.

An hourly chart of Bitcoin indicates that the price could decline further to towards $11200 – $11160 to complete the Head and Shoulders pattern, another pattern to watch is an ending diagonal which is yet to be completed as well. Bitcoin remains below the major resistance level of $11700 an in order to show another bull run it must break the dynamic resistance (ending diagonals upper edge) and close above the 11700, however testing 11200 might bring another stimulus for bulls.

BTCUSD price on Overbit

Ethereum plummeted to $380 after reaching the year’s maximum at $446.67, loosing 9.7% this week only. Digital Silver price is following a similar ending diagonal pattern, and if the upper dynamic resistance and a static resistance of 397 is not overpassed, ETH might continue the drop towards a major support at $380, and if that support is broken, towards $370 – 369.

ETHUSD price on Overbit

Unlike Bitcoin, Gold lost only 0.20% in price for the week. A significant drop was on Wednesday August 19 ahead of US data announcements, where the precious metal lost 3.67% after gaining 2.97% on Monday and Tuesday.

Head and shoulders pattern is identified on an hourly chart of Gold and the price might continue the drop down to $1881.60 – 1880, where if the support laid on those level withheld the price might retrace towards 2014 and if above towards 2046, where the bearish pattern will be completed.

Gold price on Overbit

Since Gold and Silver prices demonstrate similarities in their price action, the same Head and Shoulders is visible on an hourly chart of XAGUSD. The price is below the dynamic support of August 12 which might signal to a further decline down to $25.30.

Silver price on Overbit

The price continues the short-term downtrend move inside a descending channel, which in other had forms another controversial to the H&S pattern of Bullish Flag.

Silver price on Overbit

If bulls are able to push the price above the dynamic support and if the dynamic resistance is overtaken at $27, the bullish run might proceed towards $28 – 28.50.

Key takeaways for the upcoming week would be announcements from Eurozone, Great Britain, China and the US.

Important announcements to watch:

Tuesday, August 25, 2020

German GDP (YoY) as per Second quarter data is expected to be -11.7%, 9.8% lower than the previous -1.9%

German GDP (QoQ) as per Second quarter data is expected to be -10.1%, 7.9% lower than the previous -2.2

US CB Consumer Confidence (August) is expected to be 93, 0.4 points higher than the previous 92.6

US New Home Sales (July) is expected to be 786K, 10K higher than the previous 776K

Wednesday, August 26, 2020

US Core Durable Orders is expected to be 2.1%, 1.5% lower than the previous 3.6%

Thursday, August 27, 2020

US GDP (QoQ) as per 2nd Quarter is expected to be -32.6%, 0.3% higher than the previous -32.9%

US Initial Jobless Claims is expected to be 1,000K, 106K lower than the previous 1,106K

US Pending Home Sales (MoM) as per July is expected to be 4.5%, 12.1% points higher than the previous 16.6%

Asides from the data to be announced, there are other important events to trace.

Republican National Convention, which will be held on Monday, in which delegates will determine the nominees for the upcoming presidential elections. Markets will be watching this event closely as during the current campaign Democrats are having an edge over republicans.

Source: Yahoo Finance

Another major event would be an annual Jackson Hole conference this Thursday, August 27, where FED Chairman Jerome Powell will speak about current economic situation, inflation targets and possibly share preliminary focus on interest rate change.

The economic state and inflation in the US once again are an important constituent of the Global economy and global markets, all these events will be decisive for the mid-term price movements for the US Indices, commodities and cryptocurrencies.

Will Tesla Stock Price Crash?

Just today, Tesla surpassed Walmart’s market cap – how is that possible? Walmart has 534.66 billion in sales versus just 25.71 billion for Tesla.

TESLA DAILY CHART

The trend in TSLA is overbought. The MACD and the RSI (14) are diverging negatively, suggesting waning momentum. The stock is behaving like a commodity – not a business. I see the potential for a “buy the rumor sell the news” event after the stock splits. I think prices will correct at least 50%, and that is extremely conservative.

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Another way to measure Tesla’s ludicrous valuation is through total revenue – let me explain. Hypothetically speaking, let’s say a company paid 100% of its annual revenue to shareholders as a dividend. Of course, this is not possible, but it helps make my point. In the example below, we will measure how many calendar days it would take to recover your initial investment if each company paid 100% of their profits to shareholders at today’s stock price.

Time to recover initial investments:

Ford Motor Company (F) $6.66

Revenue 130.4 billion

Revenue Per Share $32.87

Time to recover initial investment 74-days

General Motors (GM) $28.56

Revenue 115.79 billion

Revenue Per Share $80.94

Time to recover initial investment 128-days

Walmart (WMT) $131.65

Revenue 534.66 billion

Revenue Per Share $188.23

Time to recover initial investment 255-days

Tesla (TSLA) $2042.41

Revenue 25.72 billion

Revenue Per Share $141.64

Time to recover initial investment 5263-days or over 14-years.

Lastly, the combined market cap of Ford, GM, and Fiat Chrysler (the big three) is 90-billion, and in 2019 they produced 7,470,370 vehicles. Tesla’s market cap is 300% greater than all three (307 billion), and they delivered only 195,000 vehicles – ASTONISHING.

What goes up – must come down. Will Tesla prices crash soon? Maybe – it is hard to say. Whatever the case, I think we will get a generational buying opportunity in TSLA next year or early 2022.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

Tesla Surges Higher After Split Announcement

Tesla Inc. (TSLA) is trading higher by more than 8% in Wednesday’s U.S. session after announcing a 5-for-1 stock split, effective for shareholders of record at the close on August 28. The news follows Apple Inc.’s (AAPL) 4-for-1 split announcement on July 31, with both actions intended to attract a greater share of young market participants who opened commission-free broker accounts with U.S. stimulus checks earlier this year.

Tesla Announces 5-For-1 Stock Split

Splits don’t change valuation but they can be effective tools to improve sentiment after a stock has posted out-sized gains. The practice was shunned after the Internet bubble broke in 2000, with public corporations seeking institutional ownership by letting stock prices grow to triple and quadruple digits, making shares less attractive to under-capitalized traders. The introduction of speculative capital this year has shifted the paradigm once again, suggesting many high tech companies will follow suit in coming months.

Tesla CEO Elon Musk discussed the future of electric vehicles in a July 26 interview, noting “There’s two billion cars and trucks on the road in the fleet, and there’s a hundred million made per year, roughly. So this is something I often have to remind people of – even if all cars tomorrow were electric and autonomous, it would take 20 years to replace the fleet. So you’ll have this strange situation, kind of like when they had horses and automobiles going down Main Street at the same time for a few decades.”

Wall Street And Technical Outlook

Wall Street has grown more cautious on Tesla after the 4-month 1,400+ point rally, with a ‘Hold’ rating based upon 4 ‘Buy’, 13 ‘Hold’, and a gut-wrenching 11 ‘Sell’ recommendations. Price targets currently range from a low of just $87 to a street-high $2,400, illustrating broad-based conflict about the company’s long-term outlook. The stock is trading around $1,500 after the news, or more than $250 above the median $1,242 target.

Tesla is extremely overbought, to say the least, following an historic rally that’s driven valuation into nosebleed levels. Theoretically speaking, the company will need to post aggressive quarterly growth to support these lofty prices but, as we learned last night, Musk is willing to do what it takes to keep the faithful picking up shares. As a result, it isn’t wise to bet against the EV manufacturer, who has been crushing wave after wave of short sellers in the last 14 months.

Nio Posts More Than Double Revenue in Q2 Despite COVID-19 Crisis; Target Price $17

Nio Inc, a pioneer in China’s premium electric vehicle market, said its revenue more than doubled in the second quarter as vehicle deliveries surge despite the disruption caused by COVID-19 pandemic, sending its shares up about 10% in pre-market trading on Tuesday.

China’s electric vehicle maker said its quarterly revenue increased to at 3.72 billion yuan in the second quarter, representing an increase of 146.5% from the second quarter of 2019 and an increase of 171.1% from the first quarter of 2020. Excluding items, Nio reported a loss of 1.08 yuan per American depository share, experts had forecast a loss of 1.84 yuan per ADS.

Auto industry in the world’s second-largest economy recovered from the COVID-19 outbreak as demand picked after lockdown restrictions were eased after the country reported fewer coronavirus cases. China was also the world’s first country to register economic growth.

Nio said it delivered 10,331 in the second quarter of 2020, including 8,068 ES6s and 2,263 ES8s, compared with 3,553 vehicles delivered in the second quarter of 2019 and 3,838 vehicles delivered in the first quarter of 2020.

China’s electric vehicle maker expects total revenues to be between 4,047.5 million yuan and 4,212.3 million yuan, representing an increase of approximately 120.4% to 129.3% from the same quarter of 2019, and an increase of approximately 8.8% to 13.3% from the second quarter of 2020.

U.S.-listed shares of the company shares gained about 10% to $15.58 in pre-market trading on Tuesday. The stock surged over 250% so far this year.

Executive comment

“The current constraints on the productions will be lifted in the near future and we are confident that our production capacity can meet the accelerated demand of our models,” Chief Executive Officer William Bin Li said in a press release.

“We achieved a record-high quarterly delivery of 10,331 ES8 and ES6 vehicles in total in the second quarter of 2020 and expect to deliver 11,000 to 11,500 vehicles in the third quarter as the momentum continues.”

Nio stock forecast

Six analysts forecast the average price in 12 months at $7.26 with a high forecast of $13.50 and a low forecast of $2.50. The average price target represents a -48.91% decrease from the last price of $14.21. From those six, two analysts rated ‘Buy’, two analysts rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $12 with a high of $17 under a bull scenario and $7 under the worst-case scenario. On June 24, Goldman Sachs cuts to neutral from buy, raising the target price to $7 from $6.4.

However, we think it is good to buy at the current level and target $17 as 100-day Moving Average and 100-200-day MACD Oscillator signal a strong buying opportunity.

Analyst comment

“We believe the recent rally reflects the smooth funding process from Hefei investors. Tesla‘s success in China has also attracted fund flows for EV makers, that we think has helped to drive NIO stock performance rally,” said Tim Hsiao, equity analyst at Morgan Stanley.

“We remain EW given the long-term uncertainties around scalability. Our price target hike reflects a more meaningful sales volume upgrade in the forecast period. We lower our WACC assumption to 12% from 14% (vs. 10.9% for major OEMs), given lower equity and debt costs due to rate cuts and NIO’s proven operation,” the analyst added.

Upside and Downside Risks

1) Progress in planned A-share listing. 2) Stronger-than-expected sales volume. 3) Better-than-expected improvements in operating efficiency, Morgan Stanley highlighted as major upside risks to Nio.

1) Weaker-than-expected sales volume. 2) Lack of signs of efficiency improvement, were the major two downside risks.

General Motors Trading Higher Despite Horrific Quarter

General Motors Co. (GM) is trading higher ahead of Wednesday’s U.S. opening bell after posting a loss of $0.50 per-share, beating estimates by an impressive $1.26. Revenues matched expectations at $16.8 billion, which marked a stomach-churning 53.4% year-over-year decline.  U.S. sales fell 34% compared to the same quarter in 2019 but improved sequentially between April and June, rising from a 35% to 20% decline at quarter’s end.

General Motors Cyclical Downturn

Traditional auto manufacturers were under pressure prior to the COVID-19 pandemic, with slumping comparative sales raising fears of a cyclical downturn. The outbreak has confirmed those suspicions, with most automakers reporting steep declines. Tesla Inc. (TSLA) has been a notable exception in this equation, but the EV upstart could face similar headwinds when mass production ramps up in coming years.

Chief Financial Officer Dhivya Suryadevara pointed out strong demand for trucks in a post-release interview, noting tight inventories in this successful product line. He stated the automaker should be able to repay some debt in the second half of the year, lowering anxiety about liquidity that’s taken a hit in the crisis. The CFO also pointed out the sequential improvement but wrapped up his comments by warning the ‘situation with COVID-19 is very fluid”.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Moderate Buy’, based upon 8 ‘Buy’, 3 ‘Hold’, and 1 ‘Sell’ recommendations. Price targets currently range from a low of $15 to a street-high $39 while the stock will open this morning’s session about $3 below the median $30 target. Upside appears limited despite the ‘buy-the-news’ reaction because short covering is probably driving this uptick, rather than investors coming off the sidelines in reaction to a more bullish outlook.

General Motors has underperformed broad benchmarks since posting an all-time high in the 40s in October 2017, caught in a decline that broke 2015 support in the first quarter downdraft. The stock remounted that level in May and stalled out, entering a testing process that’s still in progress, despite this morning’s uptick. It will now take about 5 upside points to confirm support and set the stage for another rally wave.  That seems unlikely without much stronger quarterly revenues.

Markets’ Weather Weekly: Сloud-Computing and Office Software Business Missed Quarterly Estimates.

Overview and trends

U.S. weekly jobless claims hit 1.4 million, the first increase since March, as spiking virus cases halt reopening plans.

Microsoft shares tumbled as much as 2.8% on Thursday after its cloud-computing and office software business missed quarterly estimates. The share price slump caused nearly $46 billion dollars erased from the company’s market capitalization. Intel Corporation (INTC) shares were trading lower yesterday despite the company reported better-than-expected second-quarter EPS and earnings results.

As a result, the tech-heavy Nasdaq Composite finished down 2.3%. The S&P 500 closed down 1.2%. It was their worst performance since June 26. The Dow (INDU) fell 1.3%, or 354 points, its worst day in two weeks.

Stocks weren’t the only assets in the red. The US dollar, as measured by the ICE US Dollar Index, fell 0.2%. The index hit its lowest level since September 2018.

So far quarterly earnings come very mixed. On positive side there are good reports and good responses to the earnings reports from IBM (IBM), Texas Instruments (TXN), Biogen (BIIB), KeyCorp (KEY), as well as yesterday’s miracle from Tesla (TSLA) and upbeat sales commentary from Best Buy (BBY).

Then again, a close candidate for why things are “bad” would be the negative responses to earnings reports from Bank of America (BAC), Netflix (NFLX), Snap (SNAP), Capital One (COF), United Airlines (UAL), and Interactive Brokers (IBKR). Microsoft (MSFT) stock sank over 2% after reporting earnings that beat Wall Street expectations in most ways except in a key business. All these stories prompt us to be extremely vigilant, resourceful and contemplative – correct instrument selection and trade direction is key to trading success through this period!

The week was full of important news. US stocks climbed on Wednesday on positive earnings numbers from Microsoft and Tesla and as traders weighed raging tensions between the U.S. and China, a potential legislative extension to unemployment benefits, and coronavirus vaccine news. Donald Trump’s administration ordered the abrupt closure of China’s consulate in Houston, and official Beijing promptly responded with its intention to close the U.S. consulate in Wuhan in a tit-for-tat game condemned by Beijing as outrageous and unprecedented.

The U.S. government has struck an agreement with Pfizer (PFE) and BioNTech (BNTX) for up to 600 million doses of their COVID vaccine candidate should it be approved. This optimistic expectation and early preparation effort have created positive sentiment in terms of thinking about light at the end of the tunnel down the road.

Trading ideas

The Gold/Silver complex has caught renewed bids this week, which was tipped off by the major gold ETF – SPDR Gold Trust – showing up on the “Doji Week” scan back on Monday. The Doji Week scan is designed to find stocks that are in narrow ranges compared to prior week’s activity that is geared up for a stronger directional move.

There are a number of Gold/Silver – related ETFs and stocks appearing on the Wide Range Breakouts, Power Up, and Overbought results today as the market gets behind their momentum against a sliding US Dollar. As investors’ classics – Barrick Gold (GLD) and Newmont Corp. (NEM) – look increasingly overvalued by both investment multiples and technically, new kids on the block, such as Agnico Eagle Mines (AEM) and Kinross Gold (KGC) look increasingly promising. The two latter stocks unveil single digit price-to-sales ratios as opposed to double-digit ones for Barrick and Newmont.

AT&T (T)

The largest American telecom AT&T (T) beat estimates by 4 cents a share, with quarterly earnings of 83 cents per share. Revenue was in line with forecasts. The company said the COVID-19 pandemic impacted results across all its businesses. Thus, WarnerMedia revenue fell 23% to $6.8 billion as the pandemic shut down film production and movie theaters. Group revenue was down 9% YoY to $41 billion, roughly in line with the $41.1 billion consensus. In contrast, AT&T’s HBO Max boasted by around 36 million active customers (including legacy HBO subscribers), picking up 3 million in the quarter. Cash from operations was $12.1 billion with free cash flow of healthy $7.6 billion.

Total dividend payout ratio remains slightly below 50%. Nevertheless, we must not forget about this telecom’s two extremely important properties: number one, it is the value high dividend stocks. And number two, it is classic defensive countercyclical stock. Given increasing odds of exacerbating recession and noting almost ridiculously cheap valuations at P/E of less than 15, dividend yield of 7% and price-to-cash-flow of just 8 (yes, this is a single-digit number, eight), at the current price level AT&T is perhaps one of very few smart medium term buys.

Vladimir Rojankovski, Grand Capital Chief Analyst

US Stock Market: Investors Dumping Overpriced Tech Stocks, Rotating into Undervalued Cyclical Stocks

The major U.S. stock indexes plunged on Thursday as investors continued to shed high-flying tech shares due to mixed earnings reports and growing signs of a worsening coronavirus pandemic, which could drive the economy into a deep recession. The price action also suggests that investors continued to dump overpriced tech stocks, while rotating into undervalued cyclical stocks.

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3235.66, down 40.36 or -1.34%. The blue chip Dow Jones Industrial Average finished at 26652.33, down 353.51 or -1.41% and the technology-based NASDAQ Composite closed at 10461.42, down 244.71 or -2.58%.

Stock Index Recap

The bellwether S&P 500 snapped a four-day winning streak with its biggest daily percentage drop in nearly four weeks. All three major U.S. stock averages lost ground. The S&P 500 Index, the Dow and the NASDAQ Composite were mostly dragged down by shared components Apple and Microsoft Corp. Heavyweight Amazon.com was also a major drag on the tech-driven NASDAQ.

The Russell 2000 and the S&P Smallcap 600, both small cap indexes, outperformed the broader market.

Earnings Update

Second-quarter reporting season is in full-stride, with 113 S&P 500 constituents having reported. Refinitiv data shows that 77% of those have beaten expectations that were extraordinarily low. Analysts now see aggregate second-quarter S&P earnings plummeting by 40.8%, year-on-year, per Refinitiv, Reuters reported.

Microsoft Corp shares fell after reporting its cloud computing business Azure reported its first-ever quarterly growth under 50%.

Tesla Inc reported a profit for the fourth straight quarter, setting the company up for inclusion in the S&P 500. But the stock slid as analysts questioned whether the electric automaker’s stock price matched its performance.

Twitter Inc advanced after reporting its highest-ever annual growth of daily users.

American Airlines Group Inc jumped after announcing it would rethink the number of flights to add in August and September. Also, it reported an adjusted loss per share of $7.82.

Southwest Airlines said Thursday it lost $915 million in the second quarter compared with $741 million in net income a year earlier and warned that travel demand will likely remain depressed until there’s a vaccine or treatment for the coronavirus.

Economic Data and Fiscal Stimulus Bill Update

The number of Americans who filed for unemployment benefits rose more than expected last week as the coronavirus pandemic inflicted more damage to the U.S. economy.

The Labor Department said Thursday initial jobless claims came in at 1.416 million for the week-ending July 18. Economists polled by Dow Jones expected 1.3 million.

It was the 18th straight week in which initial claims totaled more than 1 million, and it snapped a 15-week streak of declining initial claims.

The number excludes recipients of Pandemic Unemployment Assistance, set to expire on July 31.

Meanwhile, Congress kept working to pass new stimulus before that deadline continued, with Senate Republicans announcing they could present their version of the bill to Democrats as early as this week.

For a look at all of today’s economic events, check out our economic calendar.