Tesla (NASDAQ: TSLA) shares have advanced from $80 above $880 since January 2020, and the current price stands around $839. The current risk/reward ratio is not good for long-term investors, although Bank of America assigned a new price target of $900 for Tesla share this week.Fundamental analysis: Tesla shares are overvalued
In the last thirty days, Tesla shares have advanced more than 35%, and according to technical analysis, there is no risk of the bear market for now. Bank of America assigned this week a new price objective of $900 on expectations that Tesla can execute on further equity raises to fund accelerated growth and higher valuation.
Tesla shares could advance even more, but the current risk/reward ratio is not good for long-term investors, and my opinion is that this company is overvalued. This December, analyst firm Jefferies downgraded its price target on Tesla to $650, but the stock price advanced even more from that moment.
“We don’t believe that Tesla can dominate the industry, given the latter’s size, structure, and politics… Nevertheless, the multiple challenges to the industry business model ensure a durable competitive edge, with a ‘messianic’ brand reaching far beyond autos, from battery supply to grid storage and autonomous driving,” said analyst Philippe Houchois from Jefferies.
Tesla is expanding its business, and the company delivered 180,570 vehicles in Q4. Tesla delivered 499,550 vehicles for the year despite the Fremont factory shutdown period in the spring.
Tesla was given little chance to achieve the 500K deliveries guidance, and according to analysts, the company is also expected to achieve strong revenue growth in 2021. Tesla increased its revenue in 2019 to $24.5B from $21.4B in 2018, but the company had a loss in both years.
At its current share price, Tesla could be a very good short-term investment with solid growth prospects. I said short- term investment because with an $805B market capitalization, this stock is expensive and represents opportunity only for short-term traders.Technical analysis: Tesla shares could advance even more, but the current risk/reward ratio is not good for long-term investors
There are some apparent risks when it comes to trading this stock currently, but Tesla will always attract potential investors and traders.Data source: tradingview.com
When we look at the chart above ( one year period), we can see that this stock price has advanced from $70 above $880, and as long the price is above this trend line, this stock remains in the “buy” zone. If the price falls on the trend line and if we get a “bullish” confirmation candle, it would be an excellent entry point for short-term traders who are trading with “stop-loss” and “take profit” orders.
If the price jumps above $900, it would be a signal to trade Tesla shares, and the next price target could be around $950.Summary
The current risk/reward ratio is not good for long-term investors, although Bank of America assigned a new price target of $900 for Tesla share this week. If we compare the total stockholders’ equity of $17.5B and the market capitalization of $805B, we can notice that this stock is significantly overvalued.
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