An analyst at Standard & Poor’s initiated coverage on shares of Tesla Motors Inc (NASDAQ:TSLA) and recommended a Sell rating for the stock with a price target of $150 per share due to concerns regarding the valuation of the electric car manufacturer.
Tesla stock is volatile
In an interview with CNBC’s Fast Money, Standard & Poor’s analyst Efraim Levy emphasized, “We are positive on Tesla’s fundamental growth story, but are concerned by its valuation.” According to Levy, there is an execution risk and opportunity for Tesla Motors Inc (NASDAQ:TSLA). He believes the stock is volatile and affected by news flow and investor sentiment shifts.
“We like the fundamental story. We see plenty of growth for the electric vehicle industry for this company, and we think that they’re becoming profitable now and there’s going to be a lot of profitable growth. However, the valuation, as you indicated, is a concern. We’re pricing in a lot of good news that has to come through,” explained Levy.
High expectations for Tesla present risks
Levy added that the very high expectations for Tesla Motors Inc (NASDAQ:TSLA) presents risks. He said, “Do you want to get in front of a runaway train, or do you reach across the tracks to try to reach the pot of gold?” According to Levy, it is currently more difficult for him to tell investors that they should hold the stock since he believes there is a downside risk to it.
On the other hand, Barclays Capital analyst Brian Johnson issued a note to investors that the electric car manufacturer’s third quarter sales performance will be higher than its guidance. Johnson believes that $141 price target for shares of Tesla Motors Inc (NASDAQ:TSLA) is a “fair value.”
In addition, Johnson is convinced that the electric car manufacturer will report improvements in gross margin, which will drive Tesla Motors Inc (NASDAQ:TSLA)’s stock price above its fair value. In terms of earnings, Johnson lowered his estimate from $0.27 to $0.17 per share in anticipation of higher operating costs. The consensus earnings estimate of the Street is $0.12 per share.
Meanwhile, Craig Irwin, an analyst at Wedbush Securities, raised his rating for the stock from Neutral to Outperform. He also increased his price target from $180 to $240 per share.