Tesla is up 20% in the last two days and one strategist says it may head higher. But, it's going to be a volatile ride.
In the last two days, electric car maker Tesla's market cap has added nearly $3.7 billion in market cap. And, it may be on its way to more, says one technician.
In the last two days, Tesla shares are up over 20% since early morning Tuesday. What sparked the jump was the company's announcement that it sold 6,900 vehicles in the last quarter of 2013, about 20% higher than expected. That's a little less than what General Motors sells in one day, though at $20 billion, Tesla is valued at more than a third of the auto giant.
This has Tesla's founder and CEO Elon Musk enthused about this year, which includes plans to break into the Chinese auto market. Speaking to CNBC, Musk said:
"I'm very optimistic about 2014. You know, our rough aspirations as I have said before are to be somewhere in excess of 800 vehicles a week by the end of the year. Obviously, we'll try to exceed that but I'm confident that we can meet that number at a very minimum.
It won't be smooth driving for Tesla, however. The company is upgrading the wall adapters and chargers for over 29,000 Tesla vehicles. The National Highway Traffic Safety Administration is calling that a recall, much to the chagrin of Musk.
While finding the most recent sales numbers to be positive, CNBC contributor Gina Sanchez, founder of Chantico Global, says Tesla's stock is priced in such a way that it can't afford anything less than flawless execution of its plans.
"Anything worse than that will be downside to the price," says Sanchez. "At 264 times forward [earnings], Tesla is still priced to perfection. So, there are so many things that have to be exactly perfect this coming year in order for that to be justified and for there to still be upside. That's the challenge that Tesla has. It's just so overvalued."
One possible failure will be if the planned, lower-priced Model E isn't released by the end of the year, says Sanchez. As well, the company still has more investments to make in order to build up demand for its electric cars.
"Just remember that this is a company that's building a ton of infrastructure using a lot of cash just to get its chargers out there," says Sanchez. "That's a lot that it has to do as a company. Everything has to hit exactly perfectly."
However, Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, believes the recent spike in the stock is a positive signal.
"Clearly, a lot of volatility in this situation," says Ross. "Tesla is high-risk, high-reward. This is what we know. I actually think the stock is a buy here. Don't be scared off over that $30 move over the last two days."
Ross notes that the stock was up 464% in the first nine months of 2013, making it one of the hottest names in the market; it closed September above $190 per share. However, it broke below $160 in early November and that level became resistance for the stock, says Ross. Now that it has broken above, Ross thinks there is more upside to come.
"You want to go with momentum," says Ross. "I think we can retest the old highs around $200 a share and perhaps even push out through those old highs."
But, the stock comes with some peril due to its volatility, notes Ross. But, technical analysis can work on Tesla, though it would be better if it were traded more.
"The patterns that unfold amidst the backdrop of this volatility will be the same patterns that we've seen time and time again," says Ross. "The more liquidity, the more people trading this stock, the better the technicals should work."
To see the rest of Sanchez on the fundamentals and Ross on the charts, watch the video above.
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