The average target for Tesla’s stock price has risen by about 50% year to date.
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Wall Street is quietly becoming more upbeat about shares of the electric-vehicle pioneer Tesla. Another analyst gave it a Buy rating on Wednesday evening.
“Tesla is the global leader in the EV market with its vertically integrated manufacturing, advanced battery and [advanced driver assistance system], innovation, and an unsurpassed EV footprint,” wrote Mizuho analyst Vijay Rakesh in a research report beginning coverage of the stock. His target for the stock price is $775, while the shares were at $688.74 on Thursday morning.
Rakesh sees EVs accounting for up to 25% of all light-vehicle production by 2024. He believes Tesla’s technology and increasing internal battery production position it well to take advantage of that projected EV growth.
Rakesh covers a mix of tech and auto stocks. His coverage list also includes NIO (NIO) and Intel (INTC).
With the Mizuho call, about 37% of analysts covering Tesla stock rate shares at Buy, compared with some 20% in early 2020. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 60%. Tesla remains below average on that metric, but it has never had a high Buy-rating ratio. In fact, 37% is about as high as the ratio has been since the end of 2019, when shares traded in the $60s.
Another sign of increased optimism is the average analyst price target. It’s up about 50% year to date, rising from roughly $420 to more than $620 a share.
What is more, the consensus earnings estimate for 2024 has gone from about $8 to $11.25 a share over the past three months. Of course, 2024 is a long way off, but Tesla is a high-growth company. It is targeting average annual growth in sales volume of 50% for the foreseeable future.
The Street’s opinion is changing, slowly, while Tesla stock drops. Shares were down 37% from their high before a 20% Tuesday rally. Shares are still down about 5% year to date, worse than the 3.8% comparable rise of the S&P 500.
Tesla shares opened higher again Wednesday, after news that consumer prices in February rose less than economists expected, allaying concern about inflation. But the rally fizzled and Tesla stock ended the day down 0.8% while the S&P 500 gained 0.6%
Tesla is richly valued, high-growth company and inflation fears, which bring higher interest rates, hurt its stock more than most. Higher interest rates not only increase the cost to borrow the money companies need to grow, but they also reduce the discounted present value of money to be earned in the future. That makes growth stocks a little less attractive, relatively speaking, than companies generating cash flow today.
Wall Street seems more positive on Tesla now that inflation concerns have dragged down the stock price.
Write to Al Root at [email protected]
