Citi goes neutral on Tesla stock, but counts itself in bull camp

Analysts at Citi decided to split the difference between bulls and bears on Tesla Inc. stock, initiating their coverage with a neutral rating.

Tesla TSLA, +0.04% is a leader in “car of the future” initiatives, including shared mobility and driverless cars, and its product success, brand appeal, and other positive attributes can’t be denied, the analysts wrote in a note this week.

But it’s best to wait for a better entry point, they said, either through a “stronger balance sheet” or “convincing signs” of a smooth production path for the Model 3, the mass-market electric sedan the company is readying for later this month, with limited ill-effects on the Model S, Tesla’s existing luxury sedan.

The next 12 months “are critical for the company as Tesla ramps up the Model 3 and the autonomous race heats up,” the analysts said. They set their price target on the stock at $357, which would represent a 10% upside on the shares current prices.

Tesla shares have gained more than 52% this year, which compares with gains around 11% for the S&P 500 index. SPX, +0.09%

Tesla shares broke record highs in May and June as investors became more optimistic about the Model 3 timeline, but the rally paused around the time Tesla reported weaker-than-expected second-quarter deliveries.

The stock flirted with bear-market territory in early July, off 19% from the all-time high of $383.45 on June 23.

Tesla is set to report second-quarter results on Aug. 2. Analysts surveyed by FactSet expect the company to report a loss of $2.38 a share on sales of $2.56 billion. That would compare with a loss of $2.09 a share on sales of $1.56 billion in the year-ago period.

The same analysts predict an adjusted loss of $1.81 a share for the second quarter.

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