New Price Target for Tesla Amid Stock 'Frenzy' and FSD Success

Over the past few sessions, traders have been focused on a huge breakout in shares of Tesla TSLA. The stock has shot from $347 to $410, a gain of 18% in just three sessions.

What caused Tesla’s massive breakout? The perception surrounding this stock recently changed. A chorus of analysts are now singing Tesla’s praises:

“FSD made no mistakes or close calls that I recall. The system handles highways very safely and confidently. It’s a game changer - the tech changes how I think about long-distance road travel.” - Adam Jonas, Morgan Stanley analyst.

Mr. Jonas’ comment referenced a recent 1,400-mile round trip from New York to Michigan, using Tesla’s FSD (full self driving). It’s clear that Tesla is getting closer to producing and deploying autonomous vehicles on a large scale.

Signs are also pointing to the rapid expansion and scaling of Tesla’s Robotaxi fleet. From Wedbush’s Dan Ives:

“Tesla is in a pole position to be a clear leader in the autonomous market opportunity, with Robotaxi set to scale to 30 to 35 cities in the U.S. over the next year.”

Our readers received a buy recommendation in June, as the stock traded near $285. We then recommended adding to that position in July, raising our cost basis to about $300. After closing at $410 on Monday, the stock has climbed 36% from that price.

Where is Tesla headed next? Let’s go to the chart to find out. 

Tesla has just broken out of an ascending triangle pattern (green dotted lines) to reach a new six-month high. The pattern itself suggests the stock could soon reach $450.

I feel that figure is too conservative, based on three factors:

1. The strong momentum of the overall market.
2. The fact that the momentum is driven by members of the Trillion Dollar Club. Tesla is a member of that club, with a market capitalization of $1.28 trillion.
3. The frenzy surrounding this stock right now, involving both retail and institutional players.

What do I mean by frenzy? CEO Elon Musk recently purchased shares of Tesla worth $1 billion. Since this is a $1.28 trillion dollar company, and Musk’s fortune is estimated at over $450 billion, a one billion dollar purchase is fairly insignificant by both measures.

Regardless, on Sunday evening, excited retail investors pushed the stock to the vaunted $420.69 figure and beyond.

However, institutional investors are also piling into the stock. On Friday, the first day of the breakout, over 168 million shares of Tesla changed hands (green arrow). That was the highest turnover for the stock in nearly three months, and was followed by a robust 163 million shares on Monday.

Now before we get too excited, keep in mind that Tesla shares have underperformed the market this year. Even counting the current breakout and rally, the shares have only gained about 8% year-to-date.

However, now that Tesla has legitimately broken out, the stock should encounter no serious overhead resistance until it approaches its all time high of $480, making that figure our new target for the stock. 

At the time of publication, Ponsi was long TSLA.