JP Morgan
JP Morgan analyst Ryan Brinkman didn't mince words when he penned a note to his clients."Tesla shares are in our view and by virtually every conventional metric not only overvalued but dramatically so," Brinkman said.
Brinkman's note came with a revised price target for Tesla, a small rise to $90 from the company's previous target of $80. The target isn't surprising, considering that many analysts have sounded alarms on Tesla's runaway share price. In particular, JP Morgan has raised concerns that the surge in Tesla's price is not a result of its performance but is instead the result of massive speculation by investors. This is reflected in the company's revised earnings forecasts, which were lowered for the next few years.
Other analysts are keen to argue that Tesla will do fine going forward, citing the increasing prominence of electric vehicles and efforts by many governments worldwide to phase out fossil fuels and gasoline-powered cars. While it's true that EVs are shaping up to be the future of automobiles, there are still significant problems with Tesla's current valuation, especially since the company's share price isn't actually reflective of Tesla's performance, which of course, was pointed out by JP Morgan.
Another particularly concerning trend that investors should be wary of is the questionable quality of Tesla's vehicles, which may impact its reputation if it doesn't take measures to increase quality assurance. This year, Tesla was ranked second to last by Consumer Reports in reliability, and dead last by JD Power's initial quality survey. Complaints included poorly fitted body parts, dying touchscreens, and weird sounds. Suppose the trend of poor quality reviews continues. In that case, some consumers may likely turn sour on Tesla, which will become increasingly dangerous for the manufacturer as companies such as General Motors
The news of JP Morgan's revised target caused Tesla's shares to drop. Shares slid 7.5% on Wednesday, hitting $604.48 from the day's open of $653.69. Thursday started poorly with a pre-market drop, but shares recovered throughout the day, with Tesla ending 3.9% up from Wednesday.
- https://markets.businessinsider.com/news/stocks/tesla-stock-price-overvalued-sp500-inclusion-outlook-jpmorgan-tsla-2020-12-1029878536
- https://www.thestreet.com/investing/tesla-trading-at-650-gets-90-price-target-from-jp-morgan
- https://www.fool.com/investing/2020/12/09/why-tesla-stock-fell-sharply-on-wednesday/
- https://www.pws.io/tesla-ranks-second-to-last-in-consumer-reports-reliability-survey
- https://www.pws.io/tesla-ranked-last-on-jd-power-initial-quality-survey