Tesla (NASDAQ:TSLA) stock made a near-term low of $179 in the beginning of June. After a relatively sharp rebound, TSLA has been in consolidation mode.
I believe that TSLA stock will consolidate in the range of $220-$250 before surging higher.
TSLA Will Get a Boost From the Trade Detente
The progress that the U.S. and China have made towards a trade pact will be positive for TSLA stock. The company’s Shanghai battery factory will become operational towards the end of 2019, and a trade truce will calm the owners of Tesla stock.
In addition, the trade war has impacted GDP growth in the United States as well as China. If the trade dispute is gradually resolved, stronger economic growth could cause the electric-vehicle sector’s growth to accelerate.
Pickups and Trucks Will Boost Tesla’s Growth
Tesla’s pickup and truck are slated to be launched within the next 12-18 months. I believe that these vehicles will boost Tesla’s revenue growth over the longer term.
Tesla’s truck, called the Semi, will have a range on a single charge of 300 miles or 500 miles. It’s expected to have a base price of $150,000. However, there are reports that its maximum range might be 600 miles.
Those specifications are attractive. It’s worth noting that PepsiCo (NASDAQ:PEP) will be buying 15 electric trucks from TSLA to replace diesel trucks at its facility. Meanwhile, Anheuser-Busch InBev (NYSE:BUD) will be deploying 21 battery electric trucks made by China’s BYD (OTC:BYDDF) in its California fleet as part of its commitment to sustainable logistics.
The point is that logistics companies are increasingly deploying electric vehicles, and TSLA should benefit from that trend.
The launch of a pickup truck will be yet another growth trigger for TSLA. An interesting trend to note is that the market for pick-up trucks remains healthy in the US even as overall automobile sales remain sluggish.
Last quarter, Ford (NYSE:F) sold the most pickup trucks of any Q3 in 14 years. That indicates that demand is shifting towards pick-ups and SUVs in the U.S.
It is expected that Tesla’s pickup will cost less than $50,00,making it competitive with existing gasoline and diesel pick-ups. Therefore, it is very likely that Tesla’s vehicle will generate strong interest.
Clearly, Tesla’s truck and pickup can cause Tesla’s vehicle deliveries to rise. Sales of the vehicles are likely to continue to climb as electric trucks become more popular
The Model Y and Roadster Are Also in the Pipeline
Tesla’s Model 3 has generated strong sales. Slated to be launched next year, Model Y will also bring in a great deal of revenue for TSLA.
Model Y will be a compact SUV, and its base features will be similar to that of the Model 3. With Model Y likely to have some of the same components as the Model 3, Tesla’s production per vehicle will probably drop.
If TSLA does manage to make the price of its Model Y attractive, the vehicle may enable TSLA to grow rapidly in 2021 and 2022.
TSLA may not sell too many Roadsters, which are likely to have a base price of $200,000. But Roadster, a premium range sports car, is worth watching out for. With a top speed of 250 miles per hour and a range of 620 miles, it will attract speed enthusiasts.
The Bottom Line on TSLA Stock
TSLA has reported relatively strong Q3 delivery numbers, and Tesla stock does not reflect the company’s likely strong Q3 results.
Its upcoming positive catalysts are the opening of its battery factory in China, the launch of Model Y and the debut of its pick-up trucks. These factors will boost Tesla’s growth in 2020 and 2021.
Moreover, TSLA generated $614 million of free cash flow in Q2. As TSLA’s delivery volumes climb , I expect its free cash flow to be more sustainable in the next 12-24 months.
Overall, I remain bullish on TSLA stock. It’s likely that Tesla stock will break out above $300 after its current consolidation period ends.
As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities.
