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- Investors looking to buy Tesla shares beyond its S&P 500 inclusion should wait until the stock returns to Earth, JPMorgan analysts said Wednesday.
- The toe maker has rallied more than 660% by 2020 amid analyst corrections, strong earnings and a boom in investors.
- The Tesla stock is “in our view and not only highly valued by virtually every conventional metric, but also dramatically,” said the team led by RJ Brinkman.
- Analysts have raised their price target from $ 80 to ડ 90, meaning a 86% drop in the next 12 months from Tuesday’s close.
- Watch Tesla Trade Live here.
In the next inclusion in Tesla’s S&P 500, investors plan to place a similar weight in the stock. JP Morgan advises that they wait.
Shares of AutoTomeker rose more than 660% in 2020 amid strong earnings, analyst improvements and overwhelming investor optimism. The company’s upcoming engagement in the benchmark index marks the latest driver for its massive rally.
JPMorgan analysts, led by RJ Brinkman, said Wednesday that investors have taken a lot of calls, wondering whether the inclusion of Dec. 21 will boost new purchases. Although plans to sell Tesla’s shares should help the company, the bank has recommended that investors avoid further stock reductions until the share price comes up with its fundamentals.
“Tesla’s shares are in our view and not just overvalued by virtually every traditional metric, but dramatically,” analysts wrote in a note to consumers.
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JPMorgan raised its price target from $ 80 to ડ 90 to 86 90, meaning it will sink 86% closer to Tuesday in the next 12 months. The bank maintains an “underweight” rating on Tesla stock.
Investors should weigh the company’s rally against earnings expectations before taking the same Tesla position as its next S&P 500 weighting, JPMorgan said. Although the stock has risen more than 800% in the last two years, analysts of the same period lower their earnings forecast for each year from 2020 to 2024.
Analysts have warned that Tesla’s rising stock prices could be driven more by “speculative enthusiasm” than the company’s recent performance.
If investors act backward and try to justify Tesla’s current market cap, the bullish arguments go ahead with reality, they added. Although the company’s market cap has exceeded the combined valuation of Volkswagen and Toyota, Tesla sold only 400,000 vehicles in 2019 to 21.8 million of the two vehicle manufacturers.
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Assuming a valuation of Tesla that would sell twice as many cars as Volkswagen and Toyota combined, it would “need an impossibly high market share,” analysts said.
Focusing on term improvement instead achieves an equally difficult goal. If Tesla tries to match the combined output of Volkswagen and Toyota, its current valuation will still need a double margin, JPMorgan said.
“You can play with numbers any way you like, but it still seems very difficult to imagine in any imaginative scenario,” the analysts said, adding that such a hypothesis only justifies Tesla’s current price, not the potential.
Tesla was at 5 635.86 per share as of 11:40 a.m. Wednesday. The company has 22 “buy” ratings, 42 “hold” ratings and 20 “sell” ratings from analysts.
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