Wall Street still fickle on Tesla stocks
Shares close at $262.80 after analyst says company will hit $430 a share
If you’re an investor that owns Tesla stock, don’t blink. Because depending on what day of the week, or even hour of the day it is, Wall Street sentiment toward the company is likely to change.
The latest example of that came on Tuesday, as Tesla’s shares climbed almost 5 percent, to close at $262.80, after Macquarie analyst Maynard Um started his coverage of the company with an outperform (the equivalent of buy) rating, and a price target of $430 a share.
If that number stands out, well, it should. Because Um’s view of Tesla values the company’s stock at more than the $420-a-share price that Tesla Chief Executive Elon Musk suggested, in August, he wanted to take Tesla private. That
was also the amount that Musk mentioned in his now-famous “funding secured” tweet, which eventually got him to agree recently to step down as Tesla’s chairman in a deal to settle fraud charges with the Securities and Exchange Commission.
For a company that had seen its market value decline by $10 billion in a week, Tesla has become a test case of its investors’ nerves. On Monday, Tesla’s shares fell by 4.3 percent after noted investor David Einhorn compared Tesla to Lehman Brothers, the investment bank that famously collapsed during the financial crisis of 2008. Last Friday, after Musk tweeted out the SEC should be called the “Shortseller Enrichment Commission,” Tesla’s stock price fell 7 percent by the close of trading.
But things changed in Tesla’s favor Tuesday, as Um said that Tesla’s product differentiation makes it “a
disruptive technology company” in energy storage and energy generation, in addition to its trademark electric car, such as the Model 3 sedan. Um said one of the benefits Tesla has in its favor is that it controls the software that makes up the brains of its vehicles, which gives it a leg up over other companies working on electric, and eventually, autonomous cars.
“(Tesla) is unique in that the company believes the existing equipment is all that is necessary to enable autonomous (driving technology),” Um wrote in a research
note in which he initiated his Tesla coverage. “We do not view the hardware as the biggest challenge but, rather, the software and the data. We believe Tesla’s collection of real-world driving data is key to enabling autonomous.”
Um said that one of the things Tesla has going for it is that, for now, it isn’t a manufacturing company in the traditional sense. “While manufacturing complexities should not be trivialized, we see this hurdle as a function of time and more surmountable than the hurdle traditional
OEMs (manufacturers) face in creating a truly connected electric vehicle,” Um said.
“In the automotive market, we believe value is shifting away from the powertrain and more toward software and electronics,” Um said that with regards to Tesla’s place among major automakers. “While others are just now starting to catch up, we believe Tesla continues to have a lead in terms of technology.”