“You know what a fugazi is?” It’s how Mark Hanna’s (Matthew McConaughey) greets us in The Wolf of Wall Street. He reminds us that “Nobody knows if a stock is going to go up, down, sideways or in circles.”
Tesla’s stock certainly shows us how dramatic the lack of consensus between analysts can be. Piper Sandler, an American multinational independent investment bank, set the stock price target for Tesla at $2,322.
Alex Potter, the managing director and senior research analyst behind this bold move, values Tesla using a discounted cash flow model (DCF model). By definition, it forecasts cash flows using the concepts of “time value of money” (TVM). The formula for computing TVM includes inputs such as interest rates, profit margins, and sales for a given timeframe. This dramatic increase is justified by an increase in sales and profit margin.
Even Elon Musk tweeted “Wow” on Monday night.
Tesla’s stock soared more than 500% over the past year. It lets us wonder whether it’s a fugazi, a whazy, a woozie or Tesla will meet customer expectations in the midst of this pandemic where the economy faces supply chain disruptions.
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