I've created my own price forecasts with super low, low-mid, mid-high and super high trading ranges from now until 2020. I've been hesitant on sharing the details since I'd much rather people create their own forecasts that are different than mine because everyone's assumptions are different. But I probably will eventually share the trading ranges and their calculations in the series I'm doing on my thread. I just want to lay out the foundation so people know how to use it and how to adjust it to make it their own.
But according to my own trading ranges, I see TSLA at the mid-high range right now. (btw, with a growth stock like TSLA, I think a mid-high trading range is a healthy zone.)
So, this is how I approach it with my long-term investments (short-term trading is vastly more complicated):
Super high range - hold stock
Mid-high range - hold stock
Low-mid range - buy stock. if approaches super low range, buy LEAPs (preferably 1.5-2 years out)
Super low range - buy LEAPs (preferably 1.5-2 years out)
This would apply for a taxable account. In a tax-deferred account, things are vastly different because taxes are deferred. In a tax-deferred account, I would consider the following:
Super high range - hold stock (if range goes over super-high range, then start selling stock to raise cash for correction)
Mid-high range - hold stock and LEAPs (if LEAPs purchased in low range and still has around 1 year left. if less than 1 year left, convert to stock.)
Low-mid range - buy stock. if approaches super low range, buy LEAPs (preferably 1.5-2 years out)
Super low range - sell stock, buy all LEAPs (preferably 1.5-2 years out)
But again, there's a lot of assumptions here. First, the long-term story of the company remains unchanged and has super growth potential. Second, one's price forecasts are accurate.
Regarding price forecast, for the super low range I calculate what a bargain investor like Warren Buffet would pay for Tesla in a time when the long-term story is in tact but the sentiment has turned extremely poor. This is the super low range and I don't expect it to enter this range for long because deep-pocketed bargain investors will sweep up the stock at this price. This is why I was able to recommend buying TSLA so strongly sub $135 last November since it was approaching super low trading range but the long-term story was in tact (I strongly believed they would overcome the fire issues).
For the super high range I calculate at what point will lots of institutions sell their TSLA holdings because the stock price is too high to justify (ie., the multiple of future projected potential earnings is just way too high for new institutional buyers to come in). In other words, the super high range is when TSLA doesn't make sense in terms of the multiples that investors are giving. Oftentimes, this multiple is roughly about double that of what the bargain investor would pay for potential earnings. I use "potential earnings" as the profit the company would have if they stopped invested and that money was turned into profit instead. Take that profit number 1-2 years out or so (that's what is visible to most investors) and figure a bargain investor would give 15-20x multiple, while the enthusiastic investor (hyped up) will give 35-40x multiple. This establishes the super low range and the super high range. Then, you can fill out the low-mid and the mid-high ranges from that.
Anyway, I probably need to go on in more detail for all this to make sense since there's a lot of numbers involved. But I think my point is that I believe that you can actually calculate the trading ranges investors are willing to give (albeit it takes a lot of numbers/calculations/etc), and those ranges can help make investment decisions.
