One team of analysts is cautious to buy into the market’s enthusiasm.
By their account, Tesla has risen on four factors: progress in China, positive incentive policies, product expansion and strong global demand.
“We believe these factors, combined with other market/technical forces have triggered a significant reduction in the market's implied risk premium for this asset,” Jonas and Sinkevicius wrote in a note. “Nearterm momentum and sentiment around the stock is admittedly very strong, but we ultimately question the sustainability of the momentum.”
The stock is priced close to their bull-case valuation and does not seem to account for risk in Tesla’s mobility business or in China.
“In our view, the current price discounts a fundamental outcome that skews much closer to a bull case than a base case,” they wrote.
Still Bullish For The Future
While they see 30% downside risk, the downgrade is more a reflection of Tesla’s short-term rather than long-term potential.
“We’re encouraged by Tesla's execution and think it deserves to be among the world’s most valuable auto companies, and is perhaps the most important auto company in the world given its EV leadership,” Jonas and Sinkevicius wrote. “However, we think investors will be presented with more attractive opportunities to own the stock in the future.”
The analysts raised their price target on positive core auto prospects. They anticipate an increase in volume in China, where Tesla has ramped more quickly than expected and the government has increased capital access.
At time of publication, Tesla's stock traded down 4.2% to about $497 per share.
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