Why Tesla Stock Rallied Today
What happened
Shares of Tesla (NASDAQ: TSLA) rose on Thursday, following bullish analyst commentary. As of 1:05 p.m. ET, Tesla's stock price was up more than 2% after rising as much as 5.7% earlier in the day.
So what
With its shares down 30% in 2022, UBS analyst Patrick Hummel believes now is the time to buy the electric vehicle (EV) leader's shares.
Tesla's swoon coincided with a broader decline in the stock market. Growth stocks were particularly hard hit, as fears of inflation and the possibility of a recession drove investors to rotate into more defensive investments.
Coronavirus-related production challenges added to Tesla's troubles. CEO Elon Musk's bid to buy popular social media site Twitter, and the possibility that he would need to sell some of his Tesla shares to finance the deal, also concerned investors.
Yet Hummel thinks Tesla is poised to rebound. He believes the EV maker's share price could soar to $1,100 -- roughly 48% above its current price near $743.
Hummel argued that Tesla's sagging stock price belies the strength of its business and intriguing expansion potential. He noted the company's vehicle order backlog stands at a record high. He highlighted Tesla's ability to ramp production as it scaled operations at its gigafactories. And he posited that Tesla's expertise in software and batteries would provide it with a sustainable advantage over its rivals.
Now what
Hummel sees Tesla's earnings per share growing to $28 by 2025, up from $4.90 in 2021. If his projections prove accurate, the EV titan is currently trading for less than 27 times its per-share profits in about three years' time. Some investors find that valuation reasonable, and they're buying Tesla's shares today.
10 stocks we like better than Tesla
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 2, 2022
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Twitter. The Motley Fool has a disclosure policy.
