What happened
Tesla (NASDAQ: TSLA) He has had a tremendous year so far, with nearly four times the value of his shares. However, at a price of over $ 1,600 today, Tesla seems like a ripe target for Wall Street analysts, because at such extreme valuations, the downside is great, and the risk of missing a rally seems limited.
And judging from today’s price action, they may be right. As analysts lined up to take their hits today, Tesla shares fell more than 5%, reaching a loss of 4% as of 3:10 p.m. EDT on Tuesday.
Image source: Getty Images.
And that
What are analysts complaining about this time? Actually, there are only two notes worth discussing today, from JMP Securities and GLJ Research.
JMP struck first, downgrading Tesla’s rating to the market this morning, according to TheFly.com, out of concern that “any short-term success Tesla may discuss in its earnings call on Wednesday now reflects heavily on stocks.”
The analyst still really likes Tesla and believes that within five years it could be a $ 100 billion auto company. JMP’s objection is simply that at a market capitalization of more than $ 300 billion today, there is “no reasonable basis to argue that the stock should be valued above current levels.” (So at best, Tesla retains its value for the next five years. At worst, it loses it. That’s the JMP argument.)
GLJ Research, on the other hand, feels even less charitable towards Tesla. In a note this afternoon, GLJ cautions that, whatever Tesla reports tomorrow, investors should take it with a grain of salt because Tesla has apparently been offering discounts on its long-range Model 3 cars for sale in China, in order to increase their numbers. .
Specifically, GLJ cites local Chinese media reports to suggest that Tesla may have negotiated a large Model 3 “fleet sale” to a buyer in China, and that buyer is now turning around and flooding the market with discounted Teslas. he Pinduoduo (NASDAQ: PDD) e-commerce site.
Now what
GLJ notes that Tesla denies that such a thing is happening in China, but the analyst does not appear to be convinced.
Is GLJ right to be skeptical, or is it being too cynical about an action that has performed fabulous this year? Well, if Tesla reports tomorrow that it is doing well in car sales, but that for some mysterious reason its gross margins are affected, then the sale of discounted fleet cars would be a possible explanation. On the other hand, if both sales and margins hold, today’s selloff could turn out to be much more than anything.
One way or another, we should all know the answer in a few more hours. Tesla reports earnings after the close of business on Wednesday.
