Though it has been a volatile day for Tesla (NASDAQ:TSLA) stock overall, touching both green and red territory, the stock momentarily hit $267.25 -- its highest level ever. At $267, the stock is up about 800% in the past two years, and about 75% year to date. In the last month alone, the stock is up about 20%.
Here is what you need to know about the key drivers behind the stock's recent gains.
The future that makes Tesla look small today
Already, the market has priced in some of the upside related to a number of huge catalysts for the company, including an all-electric Model X that could double sales, a Gigafactory set to significantly reduce lithium-ion battery costs, and its lower-cost Model 3 expected in 2017. But, as Tesla continues to execute on near-term strategies and show growing confidence in long-term plans, these big aspirations are starting to look less speculative and more certain.
The result is a handful of analyst upgrades and greater market optimism. An announcement from Tesla about an unlimited-mile, eight-year drive train warranty on Friday helps, too.
The $300 club for Tesla stock is growing. Credit Suisse, initiating coverage on the stock with a price target of $325, is the latest to join the swelling chorus of Tesla-loving analysts. Further, Deutsche Bank's analyst Rod Lache recently boosted his outlook for the company, giving Tesla a $310 price target.
And earlier this August, Morgan Stanley analyst Adam Jonas, who always seems to be one step ahead of the pack in predicting just how high Tesla stock can go, issued another report in support of his bullish $320 price target.
The Model X will prove that Tesla isn't a "one-hit wonder," Adam Jonas said in the report. "We'd be disappointed if the Model X did not sweep every major Car of the Year award on offer by the automotive media."
Tesla CEO Elon Musk echoed Jonas' optimism for the X during Tesla's second-quarter conference call:
Let's just put the orders in context. There are no cars available for a test drive. There is no information about the cars in our stores because we're only selling the S. In fact, if somebody comes in who wants to buy the X, we try to convince them to buy the S. So we anti-sell it. And we don't really provide all that much information or details about the car or provide a definitive date on when you can get it. Despite all that, there's huge demand from around the world for the X.
But could Musk still be underplaying the potential of the X? Adam Jonas thinks so: "It is in Tesla's interest to under-sell expectations of the Model X's capabilities while it is still in the early stages of the global roll-out of the Model S."
Tesla has also recently shared some news and perspective that have strengthened the business outlook:
- Tesla has already broke ground on a potential site for the Gigafactory in Reno, Nev., while it continues to court Arizona, California, New Mexico, and Texas for potential sites.
- Talk of drive unit issues for the Model S turned out to be isolated mostly to early serial number vehicles and not as big of a deal as it may have appeared, anyway.
- To illustrate just how confident Tesla is in the technology behind its electric vehicles, Tesla gave its drive unit warranty a significant boost on Friday, making the warranty better than any other powertrain warranty.
Despite all the analyst optimism and recent news that supports the thesis for Tesla as a disruptor, investors should keep the risk associated with the stock's very-forward looking valuation in mind when making investment decisions.