Stock To Watch: Tesla

 

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Tesla's Investor Day (NASDAQ: TSLA) On Wednesday, Tesla held its Investor Day; this year's event was highly anticipated as Elon Musk promised to reveal part 3 of his master plan after last releasing part 2 in 2016. While Musk did reiterate some of his primary goals, such as producing 20 million EVs by 2030, investors reacted negatively to the event, with the stock falling 5% on the day.  The primary criticism of the event was that Musk made grand statements and promises but provided no details about how the company would make them a reality. Tesla stock has been volatile for the past two years, losing 65% in 2022 before jumping more than 50% in the first two months of 2023.  Today we will look at insights from the notes that the top six analysts that track Tesla's stock sent to their clients following Investor Day. This diversity of opinions should provide unique insights into Tesla and presents both the cases for and against betting on the company's growth.

Deutsche Bank Deutsche Bank has given Tesla a buy rating and believes the stock is worth $250, meaning they feel it will increase by over 23% in the next 12 months.  Analyst Emmanuel Rosner expects a negative market reaction to Tesla's recent Investor Day and does not anticipate any significant potential positive catalysts for the stock in the short term.  However, Rosner believes that as Tesla continues to focus on cost and efficiency initiatives, the company will maintain its lead in the EV industry for the foreseeable future.

Bank of America Bank of America has given Tesla a neutral rating and believes the stock is worth $225, meaning they feel it will increase by 11% in the next 12 months.  Analyst John Murphy notes that Tesla did not make any new product announcements at the Investor day, which was a real disappointment as the company had led investors to believe that there would be more innovative projects announced.  Murphy expects that Tesla will announce a new vehicle later this year that will be more affordable and in a higher volume segment as the company focuses on reducing cost and ramping scale. Tesla is targeting a 50% reduction in cost for the next-generation vehicle relative to its current products.  Murphy is also bullish about the eventual release of the Cybertruck.

Bernstein Bernstein has given Tesla an underperform rating and believes the stock is worth $150, meaning they feel it will decrease by 26% in the next 12 months.  Analyst Toni Sacconaghi notes that a central theme of Tesla's recent Investor Day was the company's cost position, scale, and vertical integration, which essentially reaffirms the bull case that Tesla has a structural cost advantage and will use it to achieve unprecedented scale.  While Tesla does have a cost advantage compared to developed market peers today, Sacconaghi believes that competitors will close the gap in cost. He also doesn't believe this advantage will translate outside the U.S., where existing manufacturers already have production facilities. More specifically, he expresses concerns about how Tesla plans to compete on a cost basis in markets where Chinese EVs are sold, as they have a significant cost advantage over Tesla.

Wells Fargo Wells Fargo has given Tesla an equal weight rating and believes the stock is worth $190, meaning they feel it will decrease by 6.3% in the next 12 months.  Analyst Colin Langan notes that it's unclear how long the recent price cuts for the Model 3 and Model Y will sustain demand. He believes that the company needs to release a new lower-priced model to remain competitive and continue to grow.  Langan is concerned about the lack of a timeline for the lower-priced model as Tesla has a reputation for announcing new models years before they are produced, and if a new lower-cost model isn't ready for a few years, Tesla's first-mover advantages could have significantly diminished by then.

Goldman Sachs Goldman Sachs has given Tesla a buy rating and believes the stock is worth $200, meaning they feel it will decrease by 1.4% in the next 12 months.  Analyst Mark Delaney believes that Investor Day should increase investor confidence in Tesla's ability to reduce costs by approximately 50% with its next-generation platform.  Delaney notes that Tesla's vertically integrated model allows it to optimize both cost and performance criteria and that the breadth and depth of Tesla's team further support the belief that the company will successfully achieve its cost reduction goals.

JPMorgan JPMorgan has given Tesla an underweight rating believing that the company's stock is worth $120, meaning they feel it will drop by over 40% in the next 12 months.  Analyst Ryan Brinkman says that despite the company's Investor Day, they don't have a different view of the potential of Tesla.  JPMorgan believes that although Tesla continues to parade claimed innovation in clean energy and innovative design and manufacturing processes for its vehicles, in reality, the company has few measurable metrics to prove its claims and fails to give any specifics about the "innovations" it claims to have.

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