Tesla stock continued to rise after the Christmas holiday, hitting another fresh intraday record on Thursday.
The stock rose more than 1% to trade above $430 on Thursday. At such levels, the electric-car maker has become one of the best performing auto stocks in 2019, rising 29% year to date versus Ford’s (F) 23% and General Motors ’ (GM) 9% gain. Still, analysts aren’t so sure the rally can continue much longer into the next year.
Tesla stock (ticker: TSLA) has been on fire over the past few months, surging nearly 70% since the beginning of October and more than 140% from its low in June. According to calculations from Morgan Stanley analyst Adam Jonas, Tesla’s enterprise value is now approaching $85 billion—that’s more than Ford and General Motors combined.
The company turned a surprise profit in the third quarter to post an adjusted $342 million, or $1.91 per share, in earnings. That was down from $2.90 in adjusted earnings per share in the year-ago period, but far ahead of analysts’ consensus expectation of a loss of 46 cents.
Investors were also excited about Tesla’s coming Gigafactory 3 in Shanghai, China, which will produce battery cells along with Model 3 and Model Y cars. Combined with healthy underlying consumer demand in China, Tesla is about to “demonstrate to the market what margins they are capable of when they make cars somewhere other than Silicon Valley,” wrote Jonas in a note to clients on Monday. The company also unveiled its first “cyberpunk” pickup truck last month.
In a Thursday note, Wedbush analyst Daniel Ives raised his target price for Tesla stock to $370 from the previous $270. While that’s a significant jump, the target is still well below Tesla’s current trading price at $430 per share.
While part of the recent rally has been a massive covering of short positions, Ives admits that the improvement of the Tesla’s underlying fundamentals is being recognized by the Wall Street, as the company does “not just talk the talk but walks the walk.”
U.S. consumers’ demand for Tesla’s Model 3 vehicle is looking strong for the fourth quarter, wrote Ives. At the same time, demand in Europe and China should allow the company to “comfortably” hit its vehicle delivery guidance of 360,000 to 400,000 units for fiscal 2019, which would represent an increase of 45% to 65% from the previous year.
“If Tesla is able to sustain this level of profitability and demand going forward, especially in Europe and China, then the stock (and bull thesis) will open up a new chapter of growth and multiple expansion, in our opinion,” wrote Ives. But for now, he remains to wait and see.
The fact is many investors might still feel uncertain despite Tesla’s recent rally, wrote Ives. That’s because every time optimism grows for the stock, some negative issues occur around the closely-followed company, being it production issues or red ink on the financial statement.
“2020 represents a pivotal year for [CEO Elon] Musk & Co., as ultimately this will be the year the bulls have been waiting for with China coming on board and Musk’s grand electric-vehicle vision starts to take hold...” he wrote, “...or hits another stumble.”
The company needs strong cash flow and profitability for the coming years to pay back its high loads of debt, fund Musk’s myriad initiatives, and appease investors with the Tesla story. If any of those expectations hit a roadblock, bears will likely come out of hibernation mode again quickly.
Morgan Stanley’s Jonas is more bearish on Tesla, with the target price set at just $250 per share—about 42% lower than today’s level.
Admittedly, there could be a number of catalysts—being it milestones in China, the long-awaited delivery of the Model Y crossover, or new technology announcements—for a potential surge in sentiment through the first half of 2020, wrote Jonas on Monday.
Over the long term, however, he believes the market would eventually perceive the company more like a traditional auto manufacturer, rather than a high-growth tech firm. And that means valuations will shrink to reflect the change in perception.
Jonas is also cautious on Tesla’s prospects in China, given the geopolitical tensions between Beijing and Washington. The launch of the Model Y will also likely cannibalize the demand for Model 3 significantly. “We still see Tesla as fundamentally overvalued, but strategically undervalued,” he wrote.
Write to Evie Liu at evie.liu@barrons.com
"Tesla" - Google News
December 27, 2019 at 02:47AM
https://ift.tt/2PWMHl7
Tesla Stock Keeps Hitting Records. Analysts Are Still Cautious. - Barron's
"Tesla" - Google News
https://ift.tt/2ZKYHIz
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "Tesla Stock Keeps Hitting Records. Analysts Are Still Cautious. - Barron's"
Post a Comment