The Tesla (NASDAQ: TSLA) share price has been on fire this year. Year to date, it’s up about 95%.
Can shares in the electric vehicle (EV) manufacturer keep rising in the near term? Here’s my share price forecast for 2024.
Long-term potential
From a long-term investing perspective, Tesla is a stock I’m growing increasingly bullish on.
What excites me about the company is its ‘Dojo’ artificial intelligence (AI) technology. Described by legendary growth fund manager Cathie Wood as the “largest AI project in the world”, Dojo is a supercomputer designed to help Tesla develop its Full Self-Driving (FSD) technology.
In the long run, this technology could give Tesla a big edge over its rivals, and help it roll out ‘robotaxis’ and other autonomous driving services.
Short-term uncertainty
In the short term however, the company is facing some challenges. Today, Tesla is in the business of selling pretty standard EVs.
And there are a few issues to be aware of here. Firstly, consumers are cutting back on big-ticket expensive purchases right now due to high interest rates.
Secondly, drivers appear to be cooling on EVs due to factors like affordability, range anxiety, and a lack of charging networks.
Third, Tesla is now facing an intense level of competition. As a result, it’s cutting its prices.
It’s worth pointing out that the company is still expected to generate solid top- and bottom-line growth next year. Currently, analysts expect revenue to rise about 21% and earnings per share (EPS) to grow about 23%.
The three factors I mentioned above add some uncertainty to these forecasts, however. And when it comes to working out a share price target for Tesla, they need to be considered.
My share price forecast
Now, to calculate my share price forecast, I’m going to use a simple ‘earnings multiplier’ approach.
This involves taking next year’s consensus EPS forecast and applying a certain multiple to it.
Looking at analysts’ estimates, the consensus EPS forecast is currently $3.84 (I’m going to assume this is accurate, but it may not be).
As for the earnings multiple I’m willing to give the stock, it’s 40.
I think this multiple – which is about twice the US market average and significantly higher than the multiple on Nvidia – is fair weighing up the long-term growth story with the short-term challenges/uncertainty.
Multiplying the 2024 EPS forecast of $3.84 by 40, we get a price of about $154. So that’s my short-term share price target for Tesla.
Overvalued?
Now, obviously, this is a fair bit below the current share price. My target suggests Tesla stock could fall about 36% from its current levels.
I’m not the only one with a price target in this area, however. Last week, analysts at Bernstein – who have an ‘underperform’ rating on the stock – put a $150 price target on Tesla, saying that its current valuation is unjustified.
Meanwhile, analysts at HSBC recently put a $146 target price on it.
Final thoughts
I’ll point out that I don’t want to sound too bearish on Tesla.
As I said earlier, I think the stock has a lot of potential in the long run. However, in the short term, I think it has gotten a bit ahead of itself.
I wouldn’t be surprised to see it pull back, before a move meaningfully higher.
