- The Tesla stock is en route to reach a record high this week after a 7.56% gain.
- Boost in Elon Musk’s image as a CEO and reopening of Tesla’s gigafactories place the company in a strong position.
- Retail investors are also absorbing the sell-off of TSLA stocks from institutions.
The Tesla stock (NASDAQ: TSLA) is now at $898 after a 7.56% upsurge on June 2. Five key factors set it up to surpass its record highs in the near-term.
The potential catalysts are Elon Musk’s credentials as CEO getting a boost after SpaceX’s launch of two NASA astronauts, the reopening of the U.S. economy, fewer supply disruptions, retail FOMO, and the reopening of Tesla’s gigafactories.
Reason #1: Elon Musk’s Image Boost Following SpaceX Launch
Wall Street is cheering the successful and historic mission of SpaceX. It became the first private company in the U.S. to bring astronauts to the International Space Station (ISS).
Following its success, SpaceX plans to send another rocket to space, this time carrying the Starlink satellite.
Adam Jonas, Morgan Stanley analyst, said investors view the milestone of SpaceX as a win for Tesla. It improves the perception of Tesla CEO Elon Musk.
It is difficult to estimate how much of Elon Musk’s success at his other companies will affect the carmaker. But, Jonas emphasized the performance of Musk outside of Tesla matters, and investors are certainly paying attention.
Reason #2: Reopening of the U.S. Economy
The U.S. government is gradually reopening the economy as it prepares for another round of stimulus.
When many states like California and New York operated under restrictive lockdown measures, the lacking demand for cars and gasoline caused carmakers, ride-hailing companies, and oil distributors to struggle.
An increase in car usage and demand for transportation will directly benefit carmakers including Tesla.
Reason #3: Less Supply Disruptions
For manufacturers like Tesla, supply chains are crucial. Raw materials and products that are needed to produce vehicles need to be supplied without disruptions to ensure stability in manufacturing.
Due to strict lockdown measures in China and the U.S., where Tesla’s gigafactories are based, the firm’s factories had to remain shut for several months.
Employees were unable to work at the factories and the lack of consistent material supply led to stagnant production of cars in U.S. and across Europe.
As both China and the U.S. resume their workforce, Tesla will be able to manufacture cars again with stability.
Reason #4: Retail FOMO in the Stock Market Continues
Users on Robinhood, a stock trading platform mostly used by retail investors, is showing no signs of slowing down in scooping up stocks across all major industries.
The fear of missing out (FOMO) led investors to aggressively enter into industries that billionaires are avoiding, like the air industry sector.
Remi Tetot, co-founder of Real Vision, said:
Pure madness or genius? Robinhood users are positioned for travel and tourism to pick up massively. Starting with the air industry.
Tesla may see a similar retail FOMO rally as airline stocks given that institutional investors only account for around 51% of the TSLA stock based on the data from NASDAQ.
Since March, top institutional share holders of Tesla such as Baillie Gifford & Co and FMR sold more than 2.3 million shares combined.
Considering that the stock of Tesla surged since then, retail investors are likely to have absorbed the selling pressure of institutions.
The combination of four factors put together with the fact that hedge funds are yet to re-enter the stock market put Tesla in a strong position to target a new record high stock price this week.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The writer does not own any shares of Tesla.
This article was edited by Samburaj Das.
Last modified: June 2, 2020 11:33 AM UTC