Sentiment Shift Sends Tesla Stock to All-Time High: Can It Stay?

Key Points

• Tesla's stock price has surged to a new all-time high, but whether it can stay there is yet to be seen.
• The market is outrunning reality ahead of an expectedly poor year for EV sales. 
• Short interest remains low but rises as short-sellers sell into the rally; technical signals suggest a top is near. 

Shifting analysts' sentiment has driven Tesla NASDAQ: TSLA stock to a new all-time high. MarketBeat tracks 14 analysts' revisions since early November, including 12 positive price target increases and two upgrades. The upgrades are to buy from hold, and the price targets run from $175 to $411, which is significant because the range lifts the low-end, consensus, and high-end expected by the group. The bad news is that several factors suggest this market has outrun its reality, and the time has come to sell the rip.

Tesla Faces Headwinds in 2024: Don’t Bet On Strong EV Sales 

The catalyst for the analysts' shift is the U.S. presidential election in November. CEO Elon Musk is tight with incoming President Trump and likely to benefit from his presidency. However, the benefits to Tesla are questionable because President Trump will not be kind to EVs. He isn’t ending the industry, but his administration is expected to curb incentives that help sustain it. The latest updates are the transition team planning for a sweeping rollback of Biden-era EV and emissions regulations intended to cut off support for the OEMs, including those building charging infrastructure. The takeaway is that Tesla, struggling to produce significant automotive segment revenue growth, will likely continue to struggle in 2025. 

The forecast for 2025 is decent. The analysts forecast 16.5% growth at MarketBeat’s reported consensus and for the margin to widen. However, with growth in 2024 underpinned by the energy and services segments, up 52% and 30% in FQ3, investors should expect to see car sales drag on overall results. 

Tesla’s potential catalysts in 2025 will be the advancement of lower-cost models and next-gen autonomous technology, including the Cybercab; however, neither will likely bear fruit until late in the year or 2026. The latest news with the Cybercab is that the first versions won’t really be autonomous. The company plans to use remote drivers to manage and oversee operations. Regarding lower-cost models, Mr. Musk will likely disappoint the market as the company shifts gears to the future, which he believes is autonomous. He’s said pricing a car too low will undercut demand for cybercabs. 

Analysts' Sentiment Shifts But Is Still Shaky 

The analysts' sentiment has shifted but remains shaky, with coverage rising but the stock pegged at Hold and little conviction in the stock price. Roughly 60% of the ratings are Hold or lower, including nine Sells, which doesn’t speak well to the outlook. 

The range of targets is rising but remains wide, indicating a lack of conviction within the group. Because the stock price has outrun sentiment, trading well above the analyst's highest target, there is potential for it to pull back sharply, and it could happen at any time. 

The technical picture could be better. The price action looks strong, with Three White Soldiers breaking to new highs and MACD converging, but other chart signals point to weakness. Those include an overbought stochastic and tepid volume that points to a narrow rally unsupported by a broad or diverse group of investors. In this scenario, a narrow market rally has run its course, and now the market is set up to correct. 

The question is how deep the correction could be, and it may be a deep one. The best target for solid support is the previous all-time high, nearly $411, and there is no guarantee that it will hold. A move below the critical support target would be a bearish move for this market and likely lead to an even more significant decline, possibly as low as $360 or deeper. 

Short-interest and institutional activity are also of concern. The short interest at the end of November was still low, below 3%, but up nearly 1% compared to the prior report. This shows short-sellers selling into the rally, presenting a headwind for the market that will likely get stronger as the stock price advances. Regarding institutions, they’ve bought on balance all year and own more than 65% of the company. They may be enticed to sell into the rally and take profits. The stock is up more than 100% from its lows and presents an attractive time to take money off the table.