Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Tesla Stock Jumped (Again)

By Daniel Sparks - Oct 25, 2019 at 9:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shorts are getting clobbered as the Street's bearish Tesla analysts are reevaluating their price targets for the stock.

What happened

Shares of electric-car company Tesla ( TSLA 1.64% ) jumped 9.5% on Friday. The stock's gain follows an even bigger gain on Thursday. Shares are up nearly 29% in two days.

Optimism for the stock over the last two days follows the company's surprise third-quarter profit. The company's bottom line and free cash flow were both much better than expected during the period.

Friday's gain, specifically, is likely due in part to news that several bearish Tesla analysts raised their price targets for the stock, as well as a continuing short squeeze as short-sellers cover their short positions.

Model 3 interior

Image source: Tesla.

So what

Tesla's third-quarter revenue was about in line with analyst estimates. But its non-GAAP (adjusted) earnings per share came in at $1.86 -- far ahead of analysts' average forecast for a non-GAAP loss per share of $0.42. In addition, management reiterated that it believes its business has scaled to the point of being self-funding.

Following the surprise profit, some analysts with the lowest price targets on Tesla stock lifted their outlooks. Barclay's analyst Brian Johnson increased his target from $150 to $200; Credit Suisse analyst Dan Levy boosted his target from $189 to $200; and JPMorgan analyst Ryan Brinkman boosted his target from $200 to $220. Their price targets, of course, still imply downside from the growth stock's current price of $328. But an improved outlook from prominent bears may have spooked some short-sellers and prompted them to cover their positions.

Now what

For now, Tesla will need to execute well during its important holiday quarter. In order for the company to achieve its guidance to deliver 360,000 or more deliveries during 2019, the automaker will need to deliver about 105,000 vehicles during the period. This would be a quarterly record for the company.

Looking further out, Tesla will have to prove that it can remain profitable and truly be able to self-fund its business.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$1,068.96 (1.64%) $17.21
Barclays PLC Stock Quote
Barclays PLC
$185.90 (-0.44%) $0.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/09/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.