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Key Takeaways
- Tesla shares gained 12% Wednesday, a day after the electric vehicle maker announced an accelerated production timeline for new products despite missing analyst expectations.
- Bank of America upgraded Tesla stock to a “buy” rating, saying that the company addressed concerns and highlighted positive catalysts.
- Wedbush analysts maintained an “outperform” rating but lowered their price target, saying that “execution of the lower cost vehicle and driving incremental demand in the key China market must be flawless.”
- UBS also lowered its price objective, citing little clarity on Tesla’s new products.
- JPMorgan analysts said that while Tesla shares “may be rescued near term,” they have concerns about long-term sustainability.
Tesla ( TSLA ) shares jumped 12% to $162.13 Wednesday, a day after the company announced an accelerated production timeline for new products including an affordable electric vehicle (EV) despite the company’s earnings falling short of analyst expectations.
Analyst reactions following the EV maker’s earnings call varied, with Bank of America upgrading the stock to a “buy” rating , Wedbush lowering its price target , and JPMorgan raising concerns about the sustainability of the rise in Tesla’s stock price.
Bank of America Upgrades Tesla to ‘Buy’ on Building Positive Catalysts
Bank of America analysts upgraded the stock to a “buy” rating from “neutral,” but maintained its price target at $220. They wrote the “results were better than expected which, coupled with management commentary, addressed key concerns heading into the quarter and revitalized the growth narrative.”
The analysts noted that Tesla “essentially knocked out the recent negative catalysts” including slow volume growth, thin margins, launch concerns, recent layoff news , and high inventories. Bank of America also highlighted positive catalysts such as accelerated production plans, Tesla’s plans to unveil its robotaxi in August, cost-saving measures, and potential licensing opportunities.
“Admittedly, the combination of all of these may not structurally change the long-term path of the company, but in the near-term the tide in news flow appears to suggest the risk to the stock is skewing more positively,” Bank of America analysts said.
Wedbush Lowers Price Target, Saying Execution of Low-Cost Vehicle Must Be ‘Flawless’
Wedbush analysts said that on the earnings call “Elon Musk finally stepped up as the adult in the room and laid the foundation for Tesla’s growth strategy with most importantly a lower cost vehicle now slated for 2025 production and delivery.”
While Wedbush maintained its “outperform” rating, it lowered its price target to $275 from $300. “This is a volume story in the near-term and while FSD and autonomy are the golden vision for Musk and Tesla over the next decade,” the analysts said. “Clearly Tesla is going through a challenging period of delivery growth and this story will not turnaround overnight so patience is required,” they wrote.
The analysts noted that the “execution of the lower cost vehicle and driving incremental demand in the key China market must be flawless….otherwise this could derail the bull thesis in the next 6 to 12 months as the pressure builds on Musk to navigate Tesla through this dark demand storm.”
Tesla Shares ‘Rescued Near Term,’ But Lack Long-Term Sustainability, JPMorgan Says
JPMorgan analysts said “Tesla shares may be rescued near term,” but they “do not think the shares can sustain long term their current still lofty valuation.”
“We see the risk of further negative earnings revisions and continued multiple compression after 1Q24 results tracked softer even than estimates that had recently been significantly reined in,” they said, adding that recent layoffs and slowing capacity expansions could “hint at [a] needed reset of growth expectations beyond the near term.”
The analysts said they have concerns that “shares will be able to maintain these retraced losses,” though they noted this view could change as additional details about new products are provided.
UBS Reduces Price Target Citing Uncertainty Around More Affordable Vehicle Plans
UBS lowered its price objective to $147 from $160, as it said “the focus will shift back to demand” with analysts saying they “see limited growth for current lineup and lack of clarity on what these ‘new vehicles’ could bring.”
The analysts said that while a new, low-cost vehicle is coming, it’s not the Model 2 investors have been waiting for. “These new vehicles still bring a lot of new, unanswered questions, and TSLA didn’t really address, leaving us to believe much is still in flux” including details about the new product other than it being “low-cost,” a clear timeline, and the impacts of “unboxed” manufacturing, they said.
UBS said that Tesla is trying to position itself as an autonomous robotics and artificial intelligence (AI) company, but noted that “investors may balk.”
Despite Wednesday’s gains, Tesla shares have lost more than one-third of their value since the start of 2024.