Since announcing its impressive 5: 1 stock split, Tesla stock (NASDAQ: TSLA) seems to have gained momentum, opening above its record near $ 1,643.00 on Friday. Amid this, another bearish Tesla analyst seems to be throwing in the towel, giving the company an upgrade and a more optimistic pricing target.
In a recent update, Bank of America analyst John Murphy upgraded TSLA shares to the “Hold” equivalent of “Sell.” Even more surprisingly, Murphy, who has exhibited a rather bearish stance on the company, also doubled its price target for TSLA from $ 800 to $ 1,750 per share. The BoA analyst’s updates came when Morgan Stanley’s Adam Jonas, who has also become quite bearish in recent months, also raised his TSLA price target from $ 1,050 to $ 1,360 per share.
According to the Bank of America analyst, part of his optimistic outlook on Tesla is due to the company’s ‘unhindered access to capital’. Murphy maintained that Tesla’s total production of about 500,000 cars in the last 17 years is “uninspiring progress”, but several key factors have proven to be remarkable in increasing TSLA’s price. These include “Musk’s leadership, a compelling market, and improved execution.”
With this in mind, the Bank of America analyst stated that Tesla has access to low-cost capital, which is a “major advantage” that could greatly “accelerate growth to almost 50% per annum over the next five years.” This is a remarkable over-face for the analyst, considering that Murphy has proven to be quite skeptical about Tesla in the past.
Just this past April, for example, Murphy downgraded Tesla from “Neural” to “Underperform” and cut its TSLA price target from $ 500 to $ 485 per share. TSLA shares then traded around $ 600- $ 700 per share. In a note, the analyst explained that although Tesla remained a trailblazer in the electric car segment, the company faced challenges due to production, burnout of new models, cash burn, and upcoming competitors from rival manufacturers.
However, Tesla faces several obstacles, including: 1) persistent / future production problems, 2) spike / outbreak pattern for new models, 3) continuous losses / cash burn due to low production / deliveries, increased costs and new construction of facilities, and 4) the prospect on new competition and obsolescence for technology / model, ”Murphy wrote.
Tesla has since proven its strength with its profitable second quarter. And with the upcoming Battery Day event, the company is well on its way to yet another catalyst. In the past two sessions alone, TSLA stock has risen nearly 18%, and it opened at record levels on Friday. The company has also broken the $ 300 billion mark, establishing itself as the most valuable automaker in the world by market cap.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate positions within 72 hours.
