Tesla Stock will follow a sizeable recovery of 500-plus points in its Friday’s session as it will open at less than 100 points of February’s highest at $969. This entire recovery will set a stage for a potential breakout that will lift the company into quadruple digits. Moreover, this recovery is against the coronavirus pandemic low and it will mark a historic accomplishment.
In spite of the recovery, the coronavirus outbreak would be dicey as Tesla was forced to shut down its California operations in the month of March, cutting into its first-half sales. At the same time, the company is also lowering its North American prices by 6% in order to sell more vehicles, which means it will earn a lower profit on each sale at a time. A second coronavirus wave could be devastating to the company, trapping shareholders in a second major decline.
Meanwhile, the auto manufacturing industry is hoping for an increase in the demand for personal vehicles as people will avoid taking public transport post-COVID-19 but it will very difficult for Tesla to make some profit and achieve its revenue targets with employment numbers rising sharply in the coming months.
Globally the economy is reopening rapidly which is increasing the optimism for a bullish outcome, however, some analysts expect a V-shaped economic recovery before 2021.
There are several reasons to be optimistic about Tesla’s growth in the middle of the decade. i) in the first quarter of 2020 company’s earnings and revenues beat the estimates, highlighting continued demand amid the pandemic, ii) the order book held the highest ever backlog at the end of March, iii) shut operations in California reopened quickly.
However, some obstacles lie in the way to a breakout above $1,000. i) the increased demand in the month of March was dime at new support generated by the December 2019 breakout above 30-month resistance, ii) the monthly stochastic oscillator buying a cycle that still hasn’t reached the overbought level.