New Tesla Target Price After Elon Musk's $1 Billion Move
How to play Tesla after the CEO made a major investment in his own shares.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
If someone likes their own stock, that should not be a negative, right?
On Monday morning, the world learned, according to an SEC filing, that on Friday, Tesla TSLA CEO Elon Musk purchased 2,568,732 shares of the stock over a price range of $371.38 to $396.54.
Musk apparently spent more than $1 billion in total on TSLA shares this past Friday. Interestingly, also on Friday, Tesla Chair Robyn Denholm appeared at Bloomberg TV and said, "There aren't any other people out there like Elon who can actually lead the company over the next decade or so."
Denholm called Muska a "generational leader" and added that she sees him as the only one who could oversee the firm's transition from primarily being an electric car company to one that focuses on generative AI and robotics.
Earlier This Month...
Tesla offered its CEO a new compensation plan meant to motivate Musk to focus on and lead the firm for years to come. The value of this package was measured at $87.8 billion at the time of the filing, but with incentives, would grow to about $1 trillion over a number of years should the firm hit all performance targets. At that time, Denholm said, "Simply put, retaining and incentivizing Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history."
In order to hit all metrics, the firm must balance market cap at a steadily growing rate each and every year of the proposal while also maintaining steadily growing operational milestones. How long is the firm trying to retain Musk? With the firm currently running at a market cap of $1.32 billion, the targets run as high as $8.5 trillion, so it's going to take a while. That said, yes, Musk is investing in his firm and betting on himself.
A Month Away
Tesla is expected to report the firm's third quarter financial results on or close to October 15. Currently, consensus view is for an adjusted EPS of $0.49 on revenue or almost $25 billion. That would not compare all that well to the year-ago comparison of $0.72, while reflecting a year-over-year revenue contraction of about 1%. Of the 25 sell-side analysts that I know of who cover TSLA, since the start of the quarter, 13 have revised their earnings estimates lower, 10 have revised those estimates higher and two have sat on their hands.
On Friday morning, analyst Dan Ives of Wedbush, who has managed to regain his five-star rating at TipRanks as tech has rallied, reiterated his "buy" rating and hid $500 target price for the shares of Tesla.
Oddly, over the weekend, analyst Adam Jonas, who is rated at four stars by TipRanks, reiterated his "buy" rating on the stock, but with a target of $410, which is now below the last sale.
The Chart
If readers followed along with the trade I set up in early August for TSLA, which was a "buy-write," they entered the long position with a net basis of roughly $285.45 and exited at $320. A nice trade? Yes, but a trade that would pull in more than 12% if held all the way into expiration next month. In short, profit is better than a loss, but that trade, if still in place, would have left a lot of dough on the table. I am currently flat
Readers will see that the closing pennant formation that I had thought was closing more than a month ago, actually lasted into mid-September. Remember, closing pennants foretell a sharp spike in volatility, but do not imply direction. The breakout from said pennant is well under way, and is obviously bullish in nature.
Relative strength has exploded and is not in a technically overbought state. The daily MACD is also now postured quite bullishly with all three components moving in the right direction. The pivot for the breakout was the upper trendline of the pennant at the time, or roughly $358.
Is chasing the stock worth it? Based on that setup and that pivot, my target price would be in between $445 and $450, so the choice is yours. That's still a 7% move, but that's a lot of risk if one is in a pure cash account for 7%. I think it makes more sense for those with the ability to trade options to get paid to wait to potentially acquire the stock on some future weakness. Either that or just rake in the premium.
A trader can still get paid $5 or so to write October 24 (post earnings) $330 puts. That is almost precisely where the stock's 50-day and 200-day SMAs currently stand. A risk-averse trader could get long a like amount of October 24 $310 puts for about $3, thus controlling the possible loss should disaster strike, but also significantly decreasing the net credit received.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
