Tesla Motors Inc. (NASDAQ: TSLA) has been on fire to the point that the stock price surpassed gravity. Then it surpassed logic. Elon Musk’s luxury electric vehicle outfit is getting a reality check from Goldman Sachs this Tuesday. Despite raising its price target for Tesla, the upgrade was only up to $84 from $61 based upon the reality of expectations.
Tesla has defied every caution thrown at it so far. We cautioned that it was getting into a bubble valuation when it was approaching $100. Goldman Sachs made the same assessment when shares were closer to $75. But throw in a secondary and convertible offering that was designed to pay back the US Department of Energy, throw in new efforts to expand the possible footprint, and throw in an addition into the NASDAQ 100, and all of a sudden you have a stock price as high as the moon.
Goldman Sachs did outline an upside case where Tesla’s shares could be worth $113 under certain growth models, but the firm also outlined a downside scenario in case something goes awry that could take the stock back down to a value of $58 for its stock.
After witnessing the solar bubble of 2008 and after witnessing the internet bubble of 1998 to 2000, we know that reality can be trumped by momentum. In fact, logic sometimes just has no business being used when trying to evaluate how much a bubble can rise to.
Reality is winning out on Tuesday as Tesla shares are down 8.6% at $116.25 against a 52-week range of $25.52 to $133.26. Its market cap is $13.4 billion according to Yahoo! Finance, but we would also point out that the Thomson Reuters consensus stock target price is down at $87.36 as well. The highest analyst target price is $130 for Tesla’s stock.