Some of the gains Tesla Motors Inc (NASDAQ:TSLA) enjoyed on Tuesday have been erased in premarket trading this morning after some bearish reports from at least two firms. Barclays analysts have trimmed their price target for the automaker’s stock, while Stifel analysts believe that the Buy case is “thin at this point.” Shares initially fell more than 2% in premarket trading this morning, although the bears retreated slightly.
Analysts continue to rate Tesla as Hold / Equal-Weight
Analysts at Barclays have slashed their price target from $141 to $120 a share and rate Tesla Motors Inc (NASDAQ:TSLA) as Equal-Weight. Stifel analysts James J. Albertine and Lucy Webster have a similar rating on the automaker. They rate it as a Hold, and their base case for the stock is between $118 and $152 per share.
Stifel’s base case assumes mixed sentiment and some wins and losses in operational execution.
Tesla shares remain volatile
Stifel analysts believe that the volatility surrounding Tesla’s share price is just “noise at this point.” The automaker’s reputation has been under fire in the wake of three recent Model S fires. Tesla requested that the National Highway Traffic Safety Administration open an investigation into those fires to find out if anything could be done to materially improve the Model S.
But in spite of all the noise which is keeping Tesla shares volatile, the analysts believe that the Buy case is still thin. They say the argument which is focused on the automaker’s “supposed ‘paradigm shift'” “stale” and once again point investors to the company’s fundamentals—despite indications that many this year have seen Tesla Motors Inc (NASDAQ:TSLA) as a growth stock for much of the year.
Stifel focuses on Tesla’s fundamentals
The analysts list three main areas they believe are important in Tesla’s fundamentals. First, they said investors should focus on the automaker’s cash needs in terms of retail and infrastructure build-outs. Second, they remain concerned about competition, and third, they believe there is “limited (if any) success” possible in electric vehicles for a lower price point. (Personally, I think this last point is a little short-sighted, but I could end up being wrong in the long term.)
Upcoming competition for Tesla
They also provided some highlights of one vehicle they see as potential competition for Tesla Motors Inc (NASDAQ:TSLA). They mentioned the Audi A3 e-Tron, which was initially revealed at the Frankfurt Auto Show. The vehicle won’t be on the market until the first half of 2015, which puts it ahead of Tesla’s Generation III (or Model E, as it is rumored to be called), which is expected out in early 2017.
The Audi A3 e-Tron is a plug-in hybrid vehicle which is meant to use a battery for most everyday trips and then a gasoline engine for longer journeys. The current gasoline-powered A3 entry-level vehicle starts out at around $30,000, while the A-3 e-Tron could be priced under $50,000 and is expected to have a 600-mile range.
However, it is important to note that only 31 miles of that range is electric, while 553 miles of it is gasoline. For eco-conscious drivers preferring an electric vehicle, this might not compete with Tesla’s vehicles. Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan has a 250 to 300 mile range on electric power only. A key part of the argument putting the 2017 A3 e-Tron as a competitor for Tesla’s cars is going to be the technology behind how the vehicle manages 553 miles on gasoline. Miles per gallon will be important here.
Plug-ins more successful at lower price point?
The Stifel analysts believe Audi and other major automakers hold the view that a plug-in will be more successful than an all-electric vehicle at the lower price point. I’m not really sure where they get this idea and could use more concrete evidence of why they think this.