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Big Tesla Bull Just Downgraded TSLA Stock. Here’s Why

Last Updated September 23, 2020 2:08 PM
Mark Emem
Last Updated September 23, 2020 2:08 PM
  • JMP Securities views Tesla’s current stock price as being too high.
  • In July, the electric carmaker’s stock has surged over 50%.
  • After beating delivery estimates for the quarter ending June, Tesla reports Q2 earnings this week.

Tesla (NASDAQ:TSLA) bull JMP Securities has downgraded the stock  from “Market Outperform to Market Perform.”

Earlier this month, JMP raised the electric vehicle (EV) maker’s price target to $1,500 , terming the stock a “category killer.” Tesla is currently trading above $1,600. The price target was based on expectations that Tesla could hit $100 billion in revenue in half a decade.

TSLA not worth $1,600

Now the analyst says there is no compelling argument for Tesla’s current stock price:

We continue to believe that TSLA can become a $100 billion car company by 2025, but we cannot arrive at a reasonable basis for arguing that the stock should be valued above current levels, even considering our fundamental outlook.

TSLA’s downgrade brings it closer in line to the consensus on Wall Street. | Source: @DeltaOne/Twitter 

At a price of nearly $1,650 per share, Tesla’s market cap is around $305 billion, making it the most valuable carmaker in the world. The stock surge has made Elon Musk the world’s 6th richest person .

Not all analysts agree

JMP’s downgrade contrasted with Piper Sandler’s sentiments several days ago. The Wall Street firm raised TSLA’s price target  from $939 to $2,322 per share. TSLA would have to rise another 40% to reach this target.

The JMP downgrade is now closer to Wall Street’s consensus rating of ‘hold.’  The average price target for the stock is a little over $920.

TSLA is currently priced well above the consensus target. | Source: WSJ 

Tesla’s moment of truth

Just this month, Tesla’s stock has appreciated by over 50% after the EV maker reported that it delivered 90,650 vehicles. 

The expectation that Tesla could join the S&P 500 Index if it reports its first annual profit is a factor, too.

Tesla has reported profits consistently in the last three quarters. Joining the S&P 500 Index could give the stock more upside potential.

Consensus estimates lean on the electric vehicle maker reporting a loss, though. Thirty-three analysts polled by FactSet  expect a GAAP loss of $1.02 per share and an adjusted loss of $0.14 per share.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.