Tesla Inc.’s stock has been on a tear soaring by nearly 29% since the end of May. The technical chart suggests shares of the stock could rise by 9% back to their all-time highs. The growing optimism in the stock comes as investors await the highly anticipated production results for the Model 3 in the second quarter, Tesla’s new electric four-door sedan.
Tesla has a lot riding on Model 3 production, and should the company succeed in reaching its goal of 5,000 units per week when it reports results around July 3, the company could be on the path to profitability later this year. However, some see Tesla falling short—in fact, it was just yesterday that Goldman Sachs noted that Tesla would likely to fall short of expectations.
The way the stock has been climbing in recent weeks, one would think that Tesla was likely to meet its big production goal. The stock has soared and is now only 9% below its all-time high last seen in September 2017. The technical chart suggests that the stock will eventually get back to those all-time highs. The stock has been rising recently on massive volume, and it has now broken out of a short-term downtrend. Only a minor resistance level at $362 stands in the way of the stock rising back to around $385.
The relative strength index (RSI) has also been trending higher, and that would suggest that a large amount of momentum is moving into the stock.
Bullish Bets
Options traders have been increasingly betting that shares of Tesla rise as well, and some see shares rising to nearly $415 by options expiration on Aug. 17. The August $400 strike price calls have nearly 4,000 open contracts, which have been steadily rising since the middle of June. With a price of about $13.50 per contract, a buyer of the calls would need to see the stock rise to about $413.50 for the options to break even if held to expiration. It is no small bet either: The open interest has a dollar value of about $5.4 million.
A Path to Profitability
However, the road higher for Tesla may not be all that easy, as analysts are looking for the company to post a huge loss of $2.68 per share in the second quarter, nearly double last year’s loss of $1.33. However, analysts do see those quarterly losses narrowing to just $1.17 per share in the third quarter and then turning profitable in the fourth quarter with earnings of $0.05.
The next few days will be what tells investors if the stock is going to reach new heights or crash back to earth.