Investors Are Too Gloomy About Tesla Stock, Analyst Says - Barron's

Tesla Photograph by Justin Sullivan/Getty Images

Shares of Tesla weakened Friday despite a Wall Street research report saying expectations for the rest of 2019 for the electric-car company have “overshot to the negative.”

Tesla stock (ticker: TSLA) was recently down 0.4% to $218.688 in early trading. Baird analyst Ben Kallo reiterated an Outperform rating on the stock while boosting his price target from $340 to $355, more than 60% above current prices. The average price target among analysts tracked by FactSet is $279.

Kallo, a longtime bull, attracted attention in mid-April when he lowered his target on Tesla for the first time in years. He cut it again, to $340, about a month later.

With the second quarter coming to a close, analysts have been updating their estimates for how many cars the company will deliver, and attempting to characterize what they see as the narratives that will move the stock for the rest of the year. The shares are down more than 30% in 2019, although they have risen this month amid heightened optimism about Tesla’s near-term prospects.

“We like the set-up for the balance of the year,” Kallo wrote. “We think expectations have overshot to the negative and we believe there are several catalysts upcoming which could drive shares higher (beginning with the upcoming delivery release).”

Tesla is expected to report second-quarter deliveries in early June. The consensus estimate published by FactSet is currently 92,000, while the company has indicated investors should expect a figure between 90,000 and 100,000. CEO Elon Musk has said they could top the 90,700 seen in the last quarter of 2018.

Kallo projects 90,500 deliveries for the quarter. “Tesla may be able to exceed lowered expectations, which would be positive for the stock,” he wrote. He—like many of the more bearish observers who have weighed in recently—thinks deliveries will continue to be the story this year.

But other factors could help the shares, he wrote, listing several that would suggest investors should focus less on near-term results and more on longer-term opportunities.

“Potentially positive upcoming catalysts include: [a[] potential cash flow positive quarter, [a] Battery and Powertrain Analyst Day (expected this summer), volume production from the Shanghai factory, [a] pickup truck unveiling, and announcements regarding strategies to expand manufacturing/battery production capacity,” he wrote.

Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison and follow Barron’s Next at @barronsnext.

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