This Tesla stock forecast article was written by Gabriel Plat, a Financial Analyst at I Know First.

(Image Source: Tesla)



Summary

2019 fourth-quarter revenue went $300 million above expectation;

Global events such a possible recession could hold Tesla stock under $500;

Model 3 production in China can reach 500,000 per year thanks to Gigafactory 3;

The new solar-roof tile can make Tesla dominate the solar market;

Tesla stock forecast is expected to be bullish next year.





The $100 Billion Company

The year 2020 brought several good news to the electric-car maker Tesla. Thanks to the recently opened factory in China and the announcement of an increase in car sales, Elon Musk’s company surpassed Volkswagen in market value, reaching more than $100 billion. Even though the volume of the car sales is still miles away from Toyota’s – 367,500 compared to more than 9 million, it is expected that the new factory in Shanghai will help Tesla to have a bigger share of the Chinese market. Those numbers are supported by their $7.38 billion fourth-quarter revenue, over $300 million above analysts’ revenue expectation.





Putting 2020 Into Perspective

Still, global events can hold TSLA back. In case a recession occurs, it is known that luxury-car companies take a big hit in their sales. For example, luxury vehicle deliveries had a big decline following the 2008 recession. This kind of event can make Tesla revenues fall from $32 billion to $21 billion from 2020 to 2022. Also, other risks besides a recession can cause a decline in Tesla stock forecast price. The trade war between China and the USA could hurt Tesla and its new factory on Asian soil, as well as the new Coronavirus, might generate problems for Tesla in China in the short term.

Even so, there are reasons to believe that TSLA can keep its growth. First, Tesla stock price rose each year since 2012, which you can see in the graph below. Once at $22, TSLA reached $580 by January 28, an incredible increase considering the time frame. The possibility of a recession or the intensification of the trade war between China and the USA exists, but considering them as a matter of time seems incorrect or imprecise. Also, the Gigafactory in Shanghai will be used to produce cars that will be sold in China, not export to the USA – and get hit with tariffs. This will also substitute the previous strategy of Tesla importing cars from the United States to China, which was also hit by tariffs.







The Gigafactory Boost

(Image Source: Getty Images)

“We intend to continue making a significant investment, and increasing the investment in China, making the Model 3 and the Model Y and future models in China.”, said the CEO Elon Musk when visited Gigafactory 3, in Shanghai. By the time when the factory was being planned, the initial goal for Tesla was to have a production of 250,000 electric cars per year at first and doubling it eventually. Even though this should not be the case for 2020, there is potential to substantially increase the company’s revenue. Alongside this, the production cost of an electric car in China is cheaper than in the USA, not only because of the labor costs but also for shipping costs. Considering this, we can see potential revenue growth on the horizon.

As Motek Moyen, Senior Analyst at I Know First, wrote last October, the Model 3 sale can be a “sustainable and profitable revenue growth for Tesla”. With all the information we had from now on, I consider this as a very probable growth for Tesla, which can be translated to, at least, a situation that TSLA price would standstill.





The Solar Solution

By the Q3 earnings conference call, Elon Musk told that he expects Tesla Energy to be compared to Tesla’s automotive sector or business by size. “This is the most underappreciated group. I think it could be bigger”, said Musk. Considering his words, it is easy to think that Tesla might turn their focus to the solar segment after the Model 3 production looks stable from now on.

Last October, Tesla launched the third version of its solar roof tiles. Considering the low price of acquisition and installation, the “SolarGlass” can now play a large role in Tesla’s strategy to dominate a market that is expected to grow from 680.22 GW US$ to 4766.82 GW US$ in 2026.

The opportunity to Tesla not only to participate in this market but also to have a large share in it, is huge and may translate to the continuing stock price growth.





Conclusion

TSLA is poised to have a good opportunity to stay as a good investment. Whether having the same growth it had in 2019 is unlikely, the direction Tesla is taking for 2020 can support them in maintaining a bullish forecast. My buy recommendation is backed by the bullish 1-year algorithmic market score. The score for TSLA from I Know First’s stock-picking AI is 828.80.

How to interpret this diagram.





Past I Know First Success with Tesla

I Know First Algorithm successfully forecasted the Tesla stock in the past. On March 1st, 2019, the I Know First algorithm issued a bullish Tesla stock forecast. The algorithm successfully forecasted the movement of Tesla’s shares and has risen by 129.32% until today. See the chart below.

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Please note-for trading decisions use the most recent forecast.