By Claudia Assis
'We got Tesla's stock completely wrong,' analysts say
Tesla Inc. stock rallied toward an all-time high Thursday, boosted by one upgrade and hopes that a "blue" Senate will be a "potential game changer" for the Silicon Valley electric-car maker and other EV and alternative-energy companies.
Tesla (TSLA) shares traded as high as $811.61, an intraday high, extending their winning streak to a 10th session, their longest since a 10-day stretch in April.
Analysts at RBC Capital, led by Joseph Spak, raised their rating on Tesla stock to their equivalent of hold, from sell, and set a price target of $700, from a previous $339.
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"There is no graceful way to put this other than to say we got (Tesla's) stock completely wrong (even if our fundamental view to date wasn't too far off)," they said in a note Thursday. "But in the spirit of New Year's resolutions and in light of our recent EV forecast through 2050 report , we re-evaluate (Tesla's) place in the industry, growth opportunity and inexpensive access to capital."
Of the 37 analysts surveyed by FactSet, 12 rate Tesla stock a buy, 14 rate it a hold, and 11 rate it a sell, with an average price target of $455.71, implying a downside of more than 40%.
"Our biggest miss was how (Tesla) can take advantage of its stock price to raise capital inexpensively and fund capacity outlays and growth," the RBC analysts said. Traditional auto makers "need to generate significant cash from existing operations to fund their transition to electrification," and Tesla can also use its stock price to fund acquisitions, they said.
"Even a relatively large deal would be insignificant to (Tesla's) market cap ... To sum it up, the higher stock price is somewhat self-fulfilling to (Tesla's) growth potential," the analysts said.
The boost for Tesla shares came amid steep gains for shares of other EV-and EV-related companies and alternative-energy stocks in recent sessions, as investors bet that a Democrat-controlled Senate will prioritize clean-energy policies.
Related: GM sales drop for the year, but bounced back to pre-pandemic levels in Q4 ()
The iShares Global Clean Energy ETF ICLN (#phrase-company?ref=COMPANY%7CICLN;onlineSignificance=passing-mention) has gained nearly 20% this week and 190% in the last 12 months. American depositary receipts of Nio Inc. NIO (#phrase-company?ref=COMPANY%7CNIO;onlineSignificance=passing-mention), a China-based EV maker, rose nearly 11% in the week and more than a 1,500% in the past 12 months. In comparison, the S&P 500 index has gained 1.3% this week and about 18% in the last 12 months.
"A Blue Senate is very bullish and a potential 'game changer' for Tesla and the overall EV sector, with a more green-driven agenda now certainly in the cards for the next few years," Wedbush analyst Dan Ives said in a note Thursday.
"We believe a doubling down on EV tax credits and further consumer incentives and government initiatives around the EV sector will be on the horizon which is a major positive" for Tesla as well as General Motors Co. (GM), privately held Rivian , Fisker Inc. (FSR), and other EV-related companies, he said.
Tesla was added to the S&P 500 index Dec. 21 (). The stock fell in that session and the next, but has been on an upward trajectory ever since. The stock has gained more than 750% in the past 12 months, compared with gains around 18% for the S&P.
-Claudia Assis; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
January 07, 2021 13:03 ET (18:03 GMT)
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