When we talk about disruptors in the auto industry, Tesla (NASDAQ:TSLA) — with its outspoken CEO Elon Musk — is definitely top of the list. In just a few short years, the electric vehicle (EV) maker has managed to turn an age-old industry upside down. Now Tesla stock is seeing the results.
So much so, in fact, that experts predict we are just years away from a complete electric takeover. While Tesla has had its fair share of skeptics, the EV maker’s breakout performance in 2020 has now put any doubts to rest.
After hitting its delivery goal and earning the title of the “fifth most valuable company in the world,” Tesla stock is on to even bigger and better things in 2021. Here’s why its shares are a buy for me this year.
A Biden Blue Wave Will Push Tesla Stock Upward
First and foremost, the new Joe Biden administration will prove to be a fruitful development for Tesla stock as it continues to lead the auto pack. With the “Green New Deal” as a potential framework, the administration is bullish on the future of the EV market. The goal is to reach net-zero emissions by 2050 and EVs will play a role in making this a reality.
In an effort to swing the public opinion in favor of electric vehicles, the Biden Presidency is also expected to offer EV tax credits and a number of other incentives. Not only is this great news for TSLA, but it will also encourage other auto-giants to enter the market. For example, General Motors’ (NYSE:GM) plans to manufacture at least 30 battery-powered models by 2025. Yet, despite the competition, Tesla will continue to lead the EV trend well into the future.
The potential upside from the Biden Presidency for Tesla stock has many investors hoping for a strong rally in 2021. Dan Ives, an analyst at Wedbush Securities, concurs with this sentiment. He gave the stock a price target of $950, up from its current value of $875 a share. What’s more, in his “bull-case scenario,” Ives believes the price could go as high as $1,250. Doubling its share price might be a far reach — at least this year — but all arrows point toward more upside in 2021.
What We Have To Look Forward To
Based on its performance in 2020, investors are likely to see a sharp rally in Tesla stock’s price following its earnings release. However, it’s worth noting that the long-term prospects for the company remain just as bright. There are a number of reasons that hint at greater gains for the company in the new year and beyond.
For one, China has always been a key part of Tesla’s plans for global expansion. The company has ambitious goals of manufacturing 500,000 cars in the region and already has 250,000 cars in its sights. Furthermore, TSLA is among the few companies to operate in China without a local partner. This puts the brand in a competitive position against names like Nio (NYSE:NIO), which many consider to be the “Tesla of China.” On Jan. 19, TSLA started deliveries of its Model Y vehicles in China. Shares were up 1.2% following the announcement. So, as the company continues to expand in Asia, its potential is undeniably vast.
The second tailwind I see for Tesla stock is its delivery goals for 2021. After almost hitting 500,000 total vehicles (499,550 actual) in 2020, investors remain confident that the EV maker will mimic this success in the coming years. This assurance stems from the company’s plans for expansion in 2021. With a factory in China and potential entry into the Indian market, its also set to open new plants in Texas and Germany. All of these resources could help the EV giant surpass its delivery goals by a hefty margin. According to The Motley Fool, if the company reaches 1 million units this year, the stock could hit $1,500.
Bottom Line
The future of Tesla is largely divisive. Some analysts remain confident in the company’s ability to deliver robust returns in 2021. Others believe the stock price is “too good to be true” and will cool down considerably in the coming months. While both sides make good arguments, I think the stock’s fundamentals are stronger than ever.
With global expansion plans and potential entry into new markets, Tesla stock is well poised to produce some spectacular gains in the new year. Adding to this is the increased adoption of EVs across the globe. We don’t know what a post-pandemic future will look like right now, but a strong run for TSLA is definitely in the cards.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
