Tesla (TSLA, $ 845.00) The shares have the potential to reach $ 950 per share, says Wedbush analyst Daniel Ives.
But he still doesn’t think you should buy it.
Tesla’s stock jumped at opening Friday, but soon cooled, perhaps influenced by Ives slapping a Street-high price target on TSLA’s shares without increasing his recommendation.
Ives has increased its 12-month target price from $ 715 per share to $ 950 to better reflect deliveries by the electric vehicle (EV) manufacturer in China. At the same time, however, Ives maintained his Neutral rating, which is essentially the same as a call on hold.
The lack of an upgrade, although a PT implies a double-digit upside, may have caused some confusion for TSLA investors, so let’s unzip it.
The Bull Case for Tesla Stock
First, take a look at the key thinking behind Ives’ new target price.
“The hearts and lungs of Tesla’s bull thesis are centered on China as we saw consumer demand soar in 2021,” Ives wrote in his report to customers. “We believe that China’s growth story is worth at least $ 100 per share in a bull case for Tesla, as this EV penetration is set to increase significantly over the next 12 to 18 months, along with major innovations from battery coming out of Giga 3. “
(Giga 3 refers to Tesla Giga Shanghai in China. Also known as Gigafactory 3, this is where the Tesla Model 3 finally assembles.)
The bottom line is that Ives has increased its goal on Tesla’s shares “to reflect a stronger EV demand forecast going forward.” The analyst also raised his bull case price target from $ 1,000 to $ 1,250, which is what can be expected in a kind of better scenario.
So why aren’t TSLA’s shares a purchase?
Here’s why it’s not strange that Ives didn’t raise his Neutral call to Outperform: A target price of $ 950 gives the TSLA an upside of around 13%, which is no big deal after considering what it really means.
Different stock researchers want to say different things when they say Hold or Neutral or Market Perform, whatever you want. In many stores, the recommendations are compared to the S&P 500. A call option means that the analyst expects the stock to outperform the benchmark over a period of time, usually around 12 months. A waiting call reflects the expectation that the stock will perform in line with the S&P 500, while a sell call projects that the stock will lag behind the index.
You got the idea.
Wedbush’s recommendations are a little different. Instead of benchmarking for the S&P 500, it employs the other stocks in the analyst research universe as a benchmark.
“Expect the total return on the shares to be compatible with the median total return on the universe of coverage of the analyst (or the analyst’s team) in the next 6 to 12 months,” says Wedbush. Ives covers more than 30 companies, including Apple (AAPL), Microsoft (MSFT) and Salesforce.com (CRM).
In addition, Wedbush’s neutral recommendation is also firmly in the middle when considering what the rest of the street thinks. Of the 37 analysts covering TSLA shares tracked by S&P Global Market Intelligence, seven rate at Strong Buy, four say Buy, 14 at Hold, five call Sell and three say Strong Sell. The remaining four analysts have no stock recommendation.
Put it all together and Tesla’s shares will receive a consensual recommendation from Hold, according to S&P Global Market Intelligence.
Finally, the TSLA has risen about 685% in the past 52 weeks. You cannot blame anyone for being cautious when pursuing an action after a run of this magnitude.
You can be optimistic about a name and still not love it at the current levels. All stocks rise and fall regularly and randomly, and Tesla’s own shares are exceptionally volatile. Waiting for a better entry point is a perfectly reasonable argument.