The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Tesla Stock Prediction

Summary:

Elon Musk revealed that the affordable Model 3 Electric car will start production this July. He said 30 units of the Model 3 will be produced this month.

Musk also promised that production of the model 3 will exponential ramp up. He estimates that by September, Tesla will be rolling out 1,500 new Model 3 cars.

Expect bulls to believe Musk. They will likely push TSLA’s stock price higher this year.

Selling the Model 3 is Tesla’s transformation as a real rival to car firms who sell affordable electric cars like Nissan.

I Know First has a very bullish one-year algorithmic market trend forecast for Tesla’s stock. Going long now might prove profitable later.

I never expected Tesla (TSLA) to actually start production of its mass-market Model 3 electric vehicle this year. It is therefore a great surprise to read Elon Musk’s tweet that Tesla will start production of the Model 3 this month. The Model 3 has hurdled all regulatory requirements and Tesla expects 30 units before July ends.

Musk also announced that production of the Model 3 will be exponentially increased. He estimates that by September, Tesla will be producing 1,500 units of the Model 3.

(Source: Musk)

Musk announcement is guaranteed to send TSLA bulls to more uninhibited optimism. Tesla becoming a real vendor of affordable electric cars is now becoming a reality. This is why TSLA is now enjoying a stratospheric valuation. Tesla’s 5-year stock return is already at an incredible +1026.94%. However, I’m still reiterating my buy rating for TSLA. Tesla is not a car company. Tesla is a rock star technology giant who is on a big momentum run.

(Source: Google Finance)

Musk has cult-like following among the investing community. They will believe anything he says and thus, keep buying TSLA shares. Elon’s clever tweet that the Model 3 is now ready for commercial production negates the negative publicity that Tesla is still having a hard time meeting its quarterly delivery targets. Musk is good at making timely announcements which overwhelms any difficulty in Tesla’s real-world business performance.

What matter most to Musk (and his total net worth) is to keep his cult following happy and always optimistic. Tesla is a money-losing firm and yet investors keep pumping up TSLA’s price. Consequently, Musk’s net worth is now $16.4 billion.

(Source: Forbes)

Tesla Is Relatively Overvalued

As long as Elon Musk has his believers, it is pointless for financial analysts, experts, and bloggers to discuss that TSLA is clearly overvalued. Everybody who invested in TSLA is aware that the stock is relatively overvalued compared to its peers. The investing world no longer invests according to Benjamin Graham’s or Warren Buffet’s value-driven investing style.

Many people invested in Tesla because they expect it to become a multi-bagger. They studied the balance sheet, income statement, and cash flow documents of Tesla. They ignored them and still went long TSLA. The reason for this is they like Elon Musk and they believe in his vision for Tesla.

They keep forgiving Tesla’s bad record in actually delivering its electric cars. They tolerate that Tesla’s Total Liabilities now stands at $19.7 billion. Investors who went long and stayed long TSLA do not care about the company’s terrible fundamentals. They are betting big on Tesla’s future growth potential. If Musk is right, three years from now Tesla will be shipping out 500,000 cars every year. This future scenario will ultimately determine if investors who made a bet on TSLA today made a mistake or not.

Valuation of companies is a subjective effort, not objective. Each individual investor has its own valuation ratios for a company he likes. An investor can also make up optimistic Discounted Cash Flow valuations to justify his decision to invest in TSLA.

Here’s my optimistic DCF valuation for TSLA using a 10-year EBITDA Exit model.

(Source: finbox.io/Motek Moyen)

Conclusion

I reiterate my buy rating for TSLA. The earlier-than-expected availability of the budget-friendly Model 3 is an inspiring surprise for the buy-side. Swing trade TSLA according to Elon Musk’s statements, tweets, or announcements. If he starts being loud and optimistic about the Model 3, go long on TSLA. On the other hand, if his announcements do not come true, be quick and sell TSLA.

If you don’t like swing trading, you can just buy and hold TSLA now and wait until it hits $500 or $600. It will take a lot of courage to hold an extremely valued ticker like TSLA but only the bold often gets the king’s ransom.

My buy endorsement for TSLA is backed by its highly optimistic one-year algorithmic forecast from I Know First.

Fundamentals do not apply to TSLA. Better trade it according to its technical indicators and moving averages. As of today, TSLA still enjoys bullish indicators.

(Source: investing.com)

Past I Know First Forecast Success With Tesla

I Know First has been maintaining its bullish forecast of Tesla, such as its bullish article published on September 20th, 2016. In the article, it mentions that the Model S, like the Model 3, will be a hit among Tesla consumers. Since then, TSLA shares have risen 70.89% in line with the I Know First algorithm’s forecast. See chart below.

(Source: NASDAQ: TSLA)

This bullish forecast for TSLA was sent to I Know First subscribers on September 20th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.