Tesla is a controversial title. This means that investors have to sharpen their pencils and try to understand what analysts are saying – because when controversy is high, the Wall Street consensus means nothing.
There are several ways to quantify a controversial stock. One way is to look at analysts’ price targets. For Tesla (ticker: TSLA), the target prices vary considerably. The analyst’s main price target for the action is now $ 2,322, set by analyst Piper Sandler Alex Potter on Tuesday. One of the lowest of the main brokers comes from Cowen analyst Jeffery Osborne. Its target price is only $ 300 per share.
Potter uses a discounted cash flow model, or DCF, to achieve its price target. A DCF is usually a detailed financial model that predicts sales, profit margins and interest rates. It is a very useful tool for financial analysts, but, as with any model, the more assumptions there are, the greater the risk of error.
When his target price was updated on Tuesday, Potter increased his profit margin expectations due to Tesla’s advance in software technology. Tesla, for example, sells vehicle features derived from software for thousands of dollars. He also increased his vehicle delivery assumptions.
(Potter’s target generated a “Wow” tweet from CEO Elon Musk.)
Osborne’s main measurement measures are the price / earnings and price / earnings growth, or PEG, ratios. A PEG ratio is useful for comparing the valuation of other high-growth companies. It divides the PE ratio by the rate of profit growth. Tesla is growing fast, but Osborne believes the stock is still overvalued.
The Potter rate shares the equivalent of the purchase. Osborne’s note is Sell. JP Morganthis is
Ryan Brinkman, Brian Johnson de Barclays, Morgan Stanleythis is
Adam Jonas and Joseph Spak of RBC also list the equivalent of Sell.
Brinkman has a price target of $ 295, just a hair below Osborne. He calculates his price target “based only on the fundamentals”, by mixing his DCF value and his 2021 profit multiples.
Brian Johnson also has a target price of $ 300. He considers Tesla’s business execution to be impressive, but his actions are overvalued. It uses a “probabilistic” framework, which means that it mixes several scenarios to arrive at a target price. Interestingly, it publishes an upward and downward case for the stock. Its upward target is $ 1,925 per share, but its downward figure is $ 36.
Adam Jonas is a bear, but less bearish than Osborne, Brinkman and Johnson. Its price target is $ 740. It values Tesla components separately. Automotive activity, for Jonas, is worth $ 703 per share based on multiples of Ebtida. He assesses Tesla’s mobility potential, like autonomous taxis, at $ 37 per share. He zeroed in on Tesla’s solar panel and energy storage activities.
Joseph Spak has a target price of $ 615. His method is a little different from that of other analysts. It uses a sales multiple three times 2021 and an Ebitda multiple 18 times 2021 (profit before interest, taxes, depreciation and amortization) and adjusts its target for bullish and bearish scenarios.
There are so many ways to get value. These are the bears, Ben Kallo and Dan Ives are two analysts rated Hold. Kallo has a price target of $ 700 based on an estimate of 15 times 2022 Ebitda – “in line with other high-growth, large-cap peers,” he writes. It had been bullish on Tesla stocks for a long time, but downgraded its stocks in 2020 after the risk-reward ratio became more “fairly balanced”.
Ives, for his part, has a price target of $ 1,250 and values the Tesla share at 42 times its estimated profit in 2025 of $ 30 per share. By comparison, Wall Street’s earnings estimate for 2023 is around $ 24 per share.
Philppe Houchois of Jefferies and Joe Osha of JMP Securities are two other bullish analysts. Osha’s price target is $ 1,500. He values Tesla as “other category killers,” including Apple (AAPL). This leads to higher market share and profit margin assumptions than those of traditional car manufacturers.
Houchois’ target price is $ 1,200. Like Potter, it is derived from DCF. This is the first real rehearsal evaluation among Barron’s sample. However, the differences in assumptions result in a price difference of $ 1,122. This represents $ 200 billion in market value.
This is how 10 analysts arrived at a value for Tesla stocks. Thirty-six analysts cover the company, according to Bloomberg. Analysts’ average price target is now slightly below $ 900.
It is well below the trading of titles, but it is difficult to follow. Tesla shares have risen 268% since the start of the year, crushing the comparable returns of the Dow and the S&P 500. Tesla is now the most valuable automaker in the world.
Tesla shares fell 0.8% to $ 1,504.41 in the latest negotiations. The S&P 500 increased 1.2%.
Write to Al Root at [email protected]