Brian A. Johnson of Barclays downgraded Tesla Motors Inc (NASDAQ:TSLA) from Overweight to Equal Weight which puts Barclays in line with the majority of analysts. There is little question that Tesla Motors Inc (NASDAQ:TSLA) has been on an absolute tear in trading but it appears that Mr. Johnson doesn’t expect this to continue. It must be said that while Barclays has downgraded the stock, it has done so while raising the target price 57 percent from $90 to $141.
Barclays is using a probabilistic approach to its forecast for Tesla, believing that its that methodology that best covers the potential pitfalls inherent for a company that is ramping up production in order to reach mass-market producer status. Barclays and Mr. Johnson are not suggesting that Tesla is in for a fall, but rather they believe that Tesla has both a good chance of becoming a large, mass-market manufacturer and that the company will succeed in its Gen III product launch.
Barclays acknowledges Tesla Motors Inc (NASDAQ:TSLA) potential superstar status
In the report that accompanied the downgrade, Mr. Johnson did note that it’s quite possible that the stock’s momentum will continue and could quite easily reach $200 per share in the near term with an upside potential of $279 assuming mass-market OEM success.
In the report, Mr. Johnson doesn’t shy from acknowledging a bull side argument that can be made for Elon Musk becoming the next Henry Ford and consequently cementing mass market success.
Tesla Motors Inc (NASDAQ:TSLA)’s downgrade still pretty rosy
Additionally, Barclays is now calling for earnings of $0.27 and $0.46 for the next two forward quarters. Both numbers are considerably higher than the present consensus estimates. For fiscal 2013, Barclays has moved its earnings projection to $1.08 per share, up quite a bit from its last call that projected earnings of $0.2 per share.
While not unheard of, this is one of the rosiest downgrade reports you might ever read. It should be noted that when the report referred to Gen III, Barclays considers those the models that will be rolled out after the end of 2016, or Tesla’s Era II. The present era includes the Model S and the Model X CUV (cross over utility vehicle). Despite comments from Tesla’s management that suggests that Gen III will include a mass-market vehicle, Barclays believe it will be created for the mass affluent market with a starting price between $40-45,000 similar to the price point of a BMW 3 series or Audi A4.