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Tesla stock needs to drop by $1,000 to be a buy, trader says

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Analysts play price target catch-up with high-flying stocks. Here are the ones worth buying
Analysts play catch-up with high-flying stocks. Here are the ones worth buying

Tesla to $500?

The stock has climbed so high that trader Boris Schlossberg wouldn't even consider buying it unless it fell by $1,000 per share, he told CNBC's "Trading Nation" on Tuesday.

Tesla shares closed up over 1% at $1,516.80 on Tuesday.

"I feel like I've got to do a public service announcement here," he said, pointing to two other big-brand companies that saw their stocks go nowhere while they built out their businesses: Coca-Cola and Walmart.

In 1965, Coca-Cola had roughly $500 million in revenues. By 1985, revenues had grown to $8 billion, but the stock barely budged. Walmart experienced a similar stasis in the 1990s as its market cap climbed above $200 billion and it overtook Sears as the country's top retailer.

"I think it's a very, very big stretch that Tesla is going to really dominate the EV industry," Schlossberg said. "Even if you assume that it eventually grows into an actual profitable company, it will then just completely die on the vine because then the market is going to judge it by its real potential."

"That's my PSA to everybody," he said. "Once the company really becomes a real business, its actual stock growth is probably going to slow materially."

For those still interested in buying Tesla, Schlossberg issued a warning.

"If you want to trade the stock, great," he said. "But I do not think in any way, shape, or form it is an investment that is prudent at this point given the history of how these stocks trade, even if it's the greatest car company ever made."

Tesla has gotten 18 price target upgrades in the last month, including one on Tuesday from Piper Sandler, which raised its target for the stock to a new Street high of $2,300.

Todd Gordon, a managing director at Ascent Wealth Partners, which holds Tesla, saw a more promising long-term trajectory for the electric auto maker's stock.

"We trimmed half of our position [on Monday]," he said. "Traditional valuation measurements are going to be really hard to use in sort of a hyper-growth, future-shaping company like Tesla. We like it longer term. We think the analysts are forced to turn bullish, creating a very thin-air environment up here."

Pointing to the chart, Gordon said he was encouraged by the "equality" of Tesla's recent rallies — a 447% climb from mid-2019 to early 2020 and another 412% recovery run from its 2020 low.

That latest rally helped the stock break above a parallel channel that Gordon had been tracking for the better part of a year.

At that point, "we deemed it necessary or prudent to take profits," he said.

"Longer term, though, we still like it as a hardware play, but also as a software play with this full self-driving software package, which, in the future, you're going to be able to buy upfront or use as a subscription, creating very high operating margins," he said.

Gordon and Schlossberg did find themselves in agreement about the prospects for one other stock: Apple.

Gordon said he was adopting a "wait-and-see" approach with Apple given the risks of Covid-19 resurgences and uncertainty around whether there will be more government stimulus, but was encouraged by its push into 5G with chipmaker Qualcomm.

Analysts have also been playing catch-up with Apple as the stock climbs, with 16 price target upgrades in the last month.

While Gordon preferred Qualcomm, particularly if that $92 stock can reach the $95 level, Schlossberg cheered Apple as a top-notch "safe-harbor play" that could see a huge tailwind from the 5G rollout.

"This is the first time in a long, long time that Apple is really going to have a significant reason to upgrade," he said. "It already has tremendous lock-ins with all its customers, so now, there'll be a real reason for customers to upgrade the models. I think that's a great ... long-term hold."

Disclosure: Ascent Wealth Partners owns shares of Tesla and Apple.