Tesla delivered just under 140,000 vehicles during the third quarter.
Justin Sullivan/Getty ImagesWall Street continues to weigh in on Tesla’s quarterly delivery figures, with comments aligning closely with underlying ratings. Tesla bulls see record numbers and more profits. They see Friday’s dip as an opportunity. Tesla bears still struggle with valuation and think more share pressure is on the horizon.
“Deliveries won’t cut muster given the parabolic rise in the shares,” Needham analyst Rajvindra Gill wrote in a Monday research report. Gill thinks Tesla will face margin pressure, assuming smaller Model 3 sedans are less profitable than Model S and X vehicles. Tesla is selling many more of it’s less-expensive Model 3 sedans these days, as expected.
He rates shares (ticker: TSLA) the equivalent of Sell and has no price target. Valuation appears to weigh heavily on his thinking. “[Tesla] now has a market cap 10x the median market cap of the top 10 auto [makers],” Gill said. The median is roughly $40 billion, or the size of General Motors (GM). “Tesla’s revenue is forecast to increase [substantially], yet we believe the discrepancy between the current market cap and the group is significant.”
J.P. Morgan analyst Ryan Brinkman also rates shares Sell. But he raised his price target after delivery figures were posted from $65 to $75 a share. He increased his earnings estimates for the third quarter, as well, “but reiterate underweight on valuation.” He builds his price target from his financial model and by comparing Tesla to other high-growth stocks, including renewable-energy companies and makers of other disruptive tech including Alphabet (GOOGL).
There are still Tesla bulls out there. Deutsche Bank analyst Emmanuel Rosner recently upgraded Tesla stock to Buy. His price target is $500 a share. “Use stock weakness to accumulate,” Rosner wrote Monday morning. He increased his full-year earnings and delivery estimates after Friday’s news release from Tesla. “Looking at the full-year, we tweak up our forecasts to account for the [third quarter] deliveries, leading to full-year deliveries forecast of 490,000.” Wall Street expects Tesla to deliver about 480,000 vehicles in 2020.
Tesla delivered just under 140,000 vehicles during the third quarter, close to what Wall Street expected. Still, shares dropped 7.4% after the report.
Tesla stock has had a habit recently of erasing losses after news failed to live up to lofty investor expectations. Shares took only days to recover losses after the S&P decided against adding Tesla stock to its index. Shares also wiped out losses after the company’s battery technology day on Sept 22. Shares fell from $449.39 on Sept. 21 to $380.36. Last Thursday, before the deliveries report, shares closed at $448.16.
Tesla stock was up 3.4% to $429.15 in early trading Monday. The Dow Jones Industrial Average was up 0.9%. Shares are up more than 400% year to date, far outstripping the gain for the S&P 500.
Write to Al Root at allen.root@dowjones.com
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October 05, 2020 at 09:06PM
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Tesla Stock Is Too Expensive, Some Analysts Say. Buy on Weakness, Says Another - Barron's
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