One Wall Street analyst says Tesla's an 'extreme growth story' and it's not too late to buy
Last week, a team of UBS equity analysts tore up the investment thesis behind Tesla, sending the stock down 5%.
The team, led by Colin Langan, wrote, "The absolute downside for the TSLA stock is material as we believe any significant problems with the current or future products would likely cripple the company in the early stages of its growth." They gave Tesla a $160 price target and said in a worst-case scenario shares could fall as low as $43.
However, the stock has bounced back, and in a note to clients circulated on May 8, Evercore ISI analyst George Galliers defended the stock and urged Evercore clients to buy it.
Galliers reiterated his "Outperform" rating and $330 price target for Tesla, implying 7% of upside. Here's Galliers:
Galliers said that while Tesla's growth is rapid it does come at a cost. Tesla's spending grew 38% last year, way above the industry average of 6%. Evercore said that a stabilization in spending is unlikely to happen until Tesla has exhausted global demand and filled out their product offerings to include a more traditional line up of sedans, SUVs, and trucks.
Evercore does not belive Tesla will hit their 2018 target of delivering 500,000 units. The bank predicted 369,000 units in 2018 and 500,000 on a twelve month rolling basis by 2019. Evercore said such a performance would still be good enough to send the stock higher.
Gaillers made it clear that going forward, the Model 3 will be the key to Tesla's near-term success or failure.
"Tesla's top-line developments over coming quarters will ultimately be determined by the launch cadence of the Model 3," Gaillers wrote. He believes that the risks surrounding the Model 3 have diminished and that orders for the Model 3 "are without precedent."
Galliers said that the Model 3 represents the largest preorder event in automotive history with hundreds of thousands preorders in place, and expects it to be a hit.
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