- Jefferies expects TSLA to surge over the next 12 months.
- The majority in Wall Street, and Elon Musk, think this is too high.
- Established car manufacturers are fighting back with their own electric car offerings, and it is starting to pay off.
Wall Street firm Jefferies has raised Tesla’s 12-month stock price target by about 85%. The new price target is $1,200, while the previous one was $650.
The stock would have to appreciate by 20% to reach the target. Tesla (NASDAQ: TSLA) closed Friday at $1,000.90.
According to Jefferies, Tesla’s growing competitive advantage will drive the stock to new highs:
Against expectations even a few months back, the gap with peers is widening, from product to battery tech/capacity.
Wall Street is not buying Tesla
Even by the standards of the current gravity-defying stock market, Jefferies is overly optimistic. Among other Wall Street firms, Jefferies is clearly in the minority with the bullish take.
The consensus rating for the 33 analysts covering Tesla is ‘Hold.’ Only eight of these analysts have issued a ‘Buy’ rating. Nine of them are urging investors to sell.
Tesla’s average stock price target is $702.59. That’s over 40% above the current price, suggesting the electric carmaker’s stock is grossly overvalued.
Why Elon Musk has a brutal fight on his hands
Jefferies has argued that Tesla’s competitive edge is widening. Evidence on the ground suggests otherwise, though.
Not only are sales plunging, but traditional auto manufacturers are allocating more resources to developing electric cars. It will be a bloody fight going forward.
In Tesla’s established markets, there are signs of waning brand loyalty. This is especially so in Europe. In Norway, Tesla’s Model 3 sales ranked sixth during the first quarter. Sales fell to the 19th spot in April.
There was an improvement to the eighth position last month, but the Model 3 only recorded eight new registrations. The more expensive Audi e-tron recorded 579 new registrations, showing Tesla’s first-mover advantage is not guaranteed to last.
Established carmakers kicking Tesla to the curb
In the Netherlands, the Model 3’s market share has fallen from 45% in 2019 to 18% so far this year. Last month, the Model 3 came fourth in sales with Volkswagen e-Golf clinching the best-seller spot.
In China, Tesla’s market share has fallen by one percentage point. Last year, Tesla’s market share of electric vehicles stood at 5.5%. This year in May, when Tesla recorded its best month in relation to volumes, market share dropped to 4.4% as competition from local manufacturers intensified.
Growth is also stagnant in the U.S. Last year, Model 3 sales only grew by 0.3%.
What battery tech advantage?
The go-to argument of Tesla bulls is the electric carmaker’s “superior battery technology.” That may have been the case before, but the argument is no longer viable as legacy auto manufacturers invest heavily in this space.
The Elon Musk-led firm is expected to announce a one-million-mile battery at an undetermined date. Tesla also has plans to start using cobalt-free cells.
These advancements are not exclusive to Tesla, though. General Motors (NYSE:GM) has already revealed it is on the verge of developing an electric car battery that will last one million miles.
GM is also working on ultra-fast charging and zero-cobalt electrodes, proving that what Tesla can do, others can too. Maybe even better.
Then there are the electric car startups such as Rivian and Nikola Corporation (NASDAQ:NKLA) that could prove highly disruptive.
An iPhone or a piece of Tesla?
Tesla’s stock may, to no one’s surprise given its cult-like following, hit $1,200. But not because it is deserved. Instead, it will be due to irrational exuberance currently being exhibited in the stock markets.
Even Musk doesn’t think Tesla’s stock deserves such a high price. Last month, Musk said TSLA’s price was too high.
At the time, the stock was trading at $761. Nothing major has changed since then to warrant Jefferies’ new price target.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.