Tesla Gained by 582% this Year. Will it Continue Rallying?

Tesla has been one of the top stocks of 2020, with its share prices rallying by 582% over the year. However, some analysts think the electric vehicle company’s price is too high, arguing that it should be worth between $60 to $80 instead of more than $600 a share.

Gordon Johnson, founder, and CEO of GLJ Research noted that Tesla’s high valuation might soon come crashing down, considering a number of factors weighing on the stock’s price.

Among such factors is Tesla’s upcoming addition to the S&P 500, which is set for Dec. 21. According to Johnson, shareholders who were putting money into the stock ahead of the event may pull back. He believes that Tesla’s stock should be considered akin to the other over-hyped stocks like cannabis company Tilray (TLRY). Later saw a massive run-up to almost $150 a share in late 2018 but then plunged back to $7.37 a share.

Johnson also compares Tesla to the renewable energy company SunEdison. This company filed for bankruptcy in 2016 after its stock price jumped higher than $32 a share only to tumble down by 99% in 12 months.

We’ve seen this before – stated Johnson, adding that we only have to look at Tilray, SunEdison, or Suntech for the examples. These stocks went from $5 to $300 dollars, and then back to $5. Such things do happen, and he thinks that Tesla is a prime candidate. 

Why is Tesla suspectable for such an end?

Tesla’s stock is notoriously polarizing like its CEO, Elon Musk. He declared in November 2018 that the company had been single-digit weeks away from death. That happened during the ramp-up in Model 3 production. In August 2018, Musk had also tweeted that he was taking Tesla private at $420 a share, also announcing that funding was secured. However, that wasn’t so. The Securities and Exchange Commission sued Musk over that announcement. He and Tesla had to agree to pay $40 million in penalties.

In 2020, Musk decided to hinder its Model S and Model X production lines from Dec. 24 through Jan. 10. Johnson thinks that the decision is baffling, considering recent suggestions from Musk that Tesla needed to ramp up production. He noted that either production demand is a problem, or the company needs to retool or refurbish the model to make it more attractive.

However, some analysts don’t agree with Johnson. They think Tesla will continue its growth. Wedbush analyst Dan Ives stated that Tesla’s recent moves indicate its strength.