Tesla stock rally: shares rise with the stock market

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Image Courtesy: Sheeraz Raza for ValueWalk, taken at Westfield Mall, London.

Tesla‘s stock rally continued today as analysts debate the company’s long-term prospects. Several analysts have cut their price targets for the company as deliveries are expected to be lower than expected before the coronavirus pandemic hit. However, some have upgraded their position on Tesla Inc. (NASDAQ:TSLA) stock.

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Tesla stock rally: UBS upgrades

UBS analyst Patrick Hummel upgraded Tesla stock from Sell to Neutral this week, saying that demand appears to be relatively high and it remains a leader in technology. He also boosted his price target for the stock from $410 to $420.  However, he also warned that the company's net debt could cause problems in the event of a downside scenario.

He said the backlog in orders for the Model Y and Chinese demand for the Model 3 offer the strongest visibility into near-term demand. He estimates that the backlog amounts to about six to nine months for the Model Y and two months for the Model 3. Sales volumes are still likely to take a hit from the COVID-19 pandemic.

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He does believe the automaker will be able to defend its leadership in electric vehicle technology, connectivity and autonomy. He also expects Tesla to gain market share. While some have been concerned that falling oil prices would be bad for Tesla, he isn't worried. At $30 a barrel, the automaker's vehicles are "already on stick price parity" compared to equivalent luxury cars, and he believes they are superior in cost of ownership.

Argus downgrades

On the other hand, Argus Research analyst Bill Selesky downgraded Tesla stock from Buy to Hold because he expects fewer deliveries due to the coronavirus pandemic. Before the outbreak, he had expected the company's deliveries to remain "fairly robust" amid demand for the Model S, Model X and Model 3.

He still thinks Tesla has strong prospects in the long term, but in the near term, he believes consumers will be more worried about basic needs like food and employment. He believes consumer confidence and spending will take a big hit as large discretionary purchases are delayed.

Bill now expects the automaker to deliver 409,000 vehicles this year, which is a 19% decline from his previous forecast. The company has said it will delver 500,000 vehicles this year.

Tesla stock rally comes alongside other auto stocks

Tesla stock isn't the only auto stock to rally this week. Ford and General Motors are also rallying as auto stocks in general seem to be benefiting from Congress' coronavirus stimulus plan.

Blue Line Capital founder Bill Baruch told CNBC"s Trading Nation that Tesla is showing technical strength on its stock chart. He said when Tesla stock pulled back, it bounced off the 200-day moving average. After the latest rally, Tesla stock is now back above $500 per share.

Despite the rally and support line at the 200-day moving average, he did question whether consumers would be purchasing $100,000 Tesla vehicles now that consumer spending is no longer driving the economy.