After a huge 2019, Tesla shares are starting off the new year with strength.
Several points of optimism are driving the stock, as the electric vehicle maker is soon to release its fourth quarter delivery results. After the stock soared a market-beating 34% in 2019, the shares moved up as much as 2% to $426.74 Thursday, the first day of trading in 2020.
The market seems mostly optimistic on Tesla's ability to meet its fourth quarter delivery number.
While the company guided for between 360,000 and 400,000 deliveries for the entire year, analysts are looking for 362,000. Tesla must deliver roughly 106,000 vehicles for Q4 in order to reach that goal and analysts and investors are almost fully expecting that outcome.
Recently, Tesla has largely been successful in executing on its game plan more broadly, from deliveries to cost discipline and profitability. In the third quarter, Tesla reported a surprise profit, solid delivery numbers and heavy cost controls, developments which have so far reversed Tesla’s narrative to one of execution and discipline.
Now, investors are wiling to hold Tesla shares in advance of its quarterly announcements.
China, EU Optimism
Hopefully, the U.S. business will remain stable and well.
But bulls say the earlier-stage European and Chinese markets could perform handsomely for Tesla, outweighing deceleration in the U.S. Tesla is building out its gigafactory in China, which it has secured more than $1 billion of debt financing for. “With deliveries beginning in China at the end of December, this market will be an important driver for the company in 2020,” wrote Cannacord Genuity analyst Jed Dorsheimer in a note. He upped his price target to $515 a share, representing 20% upside.
Dorsheimer also noted an accelerating electric vehicle market, globally. Wedbush Securities analyst Dan Ives says “European strength should likely drive upside this quarter.” Bears are wary that heightened EV competition in the EU will be too strong for Tesla to maintain its current delivery expectations at current prices.
As for the new China operations, some analysts think Tesla could delivery 100,000 to 150,000 vehicles in the region annually, representing what would be a large chunk of its total business.