Tesla Stock Steadies For A Fresh Rally

A 3.5% pop on Monday had shares of Tesla (NASDAQ: TSLA) right around their short-term resistance level of $710. They’ve been consolidating below there for the past month after selling off sharply in February and look ripe for a breakthrough. The catalyst for the 40% drop was the sudden uptick in interest rates, a macro factor that’s considered to be bearish for high growth and tech names like Tesla. But it looks like Wall Street has chewed on the potential significance long enough and doesn’t think higher rates will be the headwind it was initially thought to be. 

Since bouncing off the $560 mark at the start of last month, shares have been setting higher lows against that temporary high around $710. This suggests there’s pressure building internally and a bullish breakout is on the cards. Both the RSI and the MACD have been trending upwards so the technicals are definitely on their side, while there are also some bullish fundamental factors in play too. 

Macro Factors

For starters, Tesla’s Q1 delivery numbers, released last week, comfortably beat analyst expectations, coming in a full 10% higher than the 168,000 forecasted. Also last week, there were reports of Apple (NASDAQ: AAPL) planning to use Tesla batteries to power their solar farm in California, setting the stage for a potential blockbuster collaboration in the coming months. 

Good news came from back a little further around the end of March too, when Biden committed himself to closing the gap on China’s lead in the adoption of electric vehicles. The $174 billion electric vehicle infrastructure package created to do this is expected to benefit Tesla disproportionately, giving bulls a fresh tailwind to consider. Morgan Stanley analyst Adam Jonas was out with comments to this effect last week and believes the "de-adoption" of fossil fuel-powered vehicles and more aggressive policies to stimulate electric vehicle sales will make it hard for the legacy players to keep up with Tesla, let alone close the gap. 

The Wall Street heavyweights haven’t been slow about rowing in behind Tesla stocks in recent weeks either, particularly in light of last quarter’s sell-off which is quickly turning into a fantastic buying opportunity. New Street Research have reiterated their $900 price target, suggesting upside of close to 30% from last night’s closing price. They’re of the opinion that Tesla is just too far ahead to have any real competition right now, with the traditional automakers forced to catch up in a state of unprofitability, while existing EV alternatives lack a technological edge. 

Fresh Upgrades

Mizuho is loving their advanced battery technology and, like their New Research peers, sees their lead in market share as easily defendable while ARK Invest sees shares hitting $4,000 by 2025. This is the most optimistic of bull cases right now and would require some stars to align but it shows how Wall Street is thinking. Time and time again Tesla shares have quieted the bears as the total addressable EV market looks to have been consistently underestimated in years gone by. 

This month already we’ve seen Wedbush and Canaccord both upgrade Tesla shares to a Buy rating, adding fresh fuel to the fire and giving investors reason to think the current dip is over and a new rally is about to begin. Wedbush’s Dan Ives is of “the opinion the 1Q delivery numbers released on Friday were a paradigm changer and shows that the pent-up demand globally for Tesla's Model 3/Y is hitting its next stage of growth as part of a global green tidal wave underway.” Canaccord’s Jed Dorsheimer struck a similar tone to his peers with his belief that “Tesla holds a several-year lead and is now expanding aggressively into storage”.

With all that in mind, the technicals are lined up to drive a fresh rally with all the macro factors in place to underpin it. We’ve seen in the past what Tesla stock can do when it sets its mind to it, would anyone bet against them right now?