GP: Elon Musk, chief executive officer of Tesla Inc., speaks during an event at the site of the company’s manufacturing facility in Shanghai, China, on Monday, Jan. 7, 2019.
Qilai Shen | Bloomberg | Getty Images
Tesla jumped again on Tuesday, set to open at a new record high as major shareholder Ron Baron forecast the company will top $1 trillion in revenue in a decade and as investors who bet against the stock scrambled to catch up.
“I just can’t believe this freaking stock. It’s insane,” Roth Capital analyst Craig Irwin said on CNBC’s Squawk Box. “This is a big separation from those of us who like to pull out the calculators and look at reality.”
The more than 15% surge comes after Tesla on Monday climbed 19.9%, its biggest one-day gain in six years. Tesla’s stock roared after Argus Research raised its price target to a new Wall Street high of $808 a share. But even Argus’ price target is below where the stock is set to open on Tuesday.
The stock traded above even $900 in premarket.
Tesla shares are up more than 80% this year through Monday’s close, fueled by analysts raising price targets to catch up to the stock and short-covering by investors betting against the shares. Analysts still can’t keep up with the run. The average 12-month price target of analysts is $493, up from $334 in December, according to FactSet. That new target is more than 40% below where the stock is trading in premarket trading Tuesday.
Roth Capital’s Irwin explained that the investor interest in Tesla is coming from some of the biggest financial institutions.
“I think this is largely the fear of missing out,” Irwin said. “The number of large hedge funds calling in, the number of institutional investors calling in, saying ‘where does it stop? What’s the catalyst?'”
“The momentum is huge,” Irwin added.
At the same time, short-sellers are scrambling with investors betting against the stock down more than $8 billion since the beginning of the year, according to S3 Partners. Since Tesla’s stock was under $200 a share in June, the firm said short sellers have covered $12.6 billion worth of stock. That’s a factor that is likely fueling Tesla’s current rally: If enough short sellers buy in tandem, it can create higher demand and itself drive the equity price even higher, a phenomenon also known as “a short squeeze.”
Two years ago Tesla CEO Elon Musk promised the “short burn of the century” was coming soon, saying in a tweet that “flamethrowers should arrive just in time.” Within an hour of Monday’s close, Musk tweeted three flame emojis.
Ron Baron: Nowhere near the end
Billionaire investor Ron Baron believes Tesla will hit $1 trillion in revenue in 10 years and continue to grow from there.
Baron’s investment firm holds nearly 1.63 million Tesla shares – worth more than $1 billion at current levels.
“It’s nowhere near ended at that point and time,” Baron said on CNBC. “There’s a lot of growth opportunities from that point going forward.”
Baron’s seemingly wild optimism has become much less outlandish after the stock’s rally over the past six months. He is among a group of money managers who have given massive forecasts for Tesla before, including Ark Investment Management founder Catherine Wood. Last month, Wood told CNBC that she believes Tesla could be worth more than $6,000 per share in the next five years – upping her prediction of $4,000 a share that she made two years prior.
‘Watch out Tesla believers’
But some Wall Street analysts are not so sure Tesla’s gains will last, and even political activist Ralph Nader chimed in on Twitter: “Watch out Tesla believers.”
“When the stock market bubble implodes, it will have been started by the surge in @Tesla shares beyond speculative zeal,” Nader said.
– CNBC’s John Melloy contributed to this report.
