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Tesla Euphoria: Signal of a Market Top?

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  • (1:00) - Learning From The Dot-com Bubble
  • (9:15) - Tesla’s Hot Streak: Are We At A Market High?
  • (15:15) - Is Tesla The New Amazon?
  • (23:00) - Episode Roundup: TSLA, TLRY, AMZN, BYND, RACE

Welcome to Episode #211 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going solo to talk about the incredible run in Tesla’s shares over the last month and whether it signals at “top” in this stock market rally.

Tesla shares have rallied over 100% in the last month as analysts have raised 2020 and 2021 earnings estimates on hopes that Tesla’s earnings are about to soar.

Price targets have also been raised sharply, with the stock actually surpassing some of those recent targets within a matter of days.

Some are calling it euphoria. Others see it as a sign that the bull market has gotten too hot to handle.

Comparisons to 1998-1999’s Bull Market

Many Baby Boomer and GenX investors may be feeling déjà vu right now, with memories of the dot-com bubble and Internet boom, as Tesla takes out the higher price targets.

Amazon was once the target of sharply higher upgrades.

Maggie Mahar’sBull! A History of the Boom, 1982-1999” gives a play-by-play about then Oppenheimer Internet stock analyst, Henry Blodgett, and his now infamous “call” on Amazon (AMZN - Free Report) in December 1998.

Earlier in 1998, he had a price target on the company of $150 which the shares quickly surpassed.

Amazon was one of the darling stocks of the Internet boom, although it had no earnings. Analysts struggled with how to model future earnings and worried about valuation.

On Dec 16, 1998, Blodgett released his $400 price target on Amazon, which subsequently jumped 20% that day to $289. The feeding frenzy was on.

By Jan 6, 1999, just a few weeks after the initial call, the shares blew past Blodgett’s $400 price target with ease.

Sound familiar?

Tesla Valuations

But IS Tesla (TSLA - Free Report) different from the Internet stock craze of 1999?

Tesla is now trading with a forward P/E of 100. Beyond Meat (BYND - Free Report) , another trading favorite, is trading with a forward P/E of 266.

Car company Ferrari (RACE - Free Report) has outperformed as well. It has seen its shares jump 198% since it’s 2016 IPO. It’s not cheap, trading at 38x forward earnings.

Other stocks in recent years have also had euphoric climbs like Tilray (TLRY - Free Report) , which was up 856% in just 3 months in 2018.

Is Tesla really a signal that we’re near the top?

Find out the answer to this question, and more, on this week’s podcast.

[In full disclosure, the author of this article owns shares of AMZN in her personal portfolio.]

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