BofA Securities upgraded the stock of Tesla Inc. (TSLA) to neutral from underperform on Wednesday, after it almost halved in the space of a month. Still, "while we continue to view TSLA as a trailblazer in the electric vehicle (EV) market, we believe investor optimism around the company and its business/financial future remains overhyped and litany of risks remain underappreciated, which keeps us relatively cautious on the stock despite the upgrade," analysts led by John Murphy wrote in a note to clients. The bank raised its stock price target to $500 from $370. "What the run up in TSLA stock from $300/sh to $900/sh+ in the span of 3 months has proven, however, is that valuation is a self-fulfilling prophecy of sorts; and we consider such "peak" valuation levels in our bull case scenarios, as well as a slightly higher probability of being achieved," said the note. Among the risk factors BofA identifed are that profitability and cash flow are not good or consistent; the company is still not self funding after a decade; credit investors are skeptical, but with equity cushion, have hopped on the bandwagon; "creative accounting and presentation helps on a transitory basis," and finally momentum buying is helping for now but a rotaiton of value stocks "could be painful." Tesla shares were down 6%, but have gained 50% in the last 12 months, while the S&P 500 has fallen 11%.
-Ciara Linnane; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
March 18, 2020 10:07 ET (14:07 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.