Tuesday, November 28, 2023

JP Morgan warns investors Tesla stock is ‘significantly overvalued’ in new report

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To add or not to add, that is the question.

As investors anticipate Tesla’s December 21 addition to the S&P 500, investors who benchmark their performance against the index have a difficult decision to make. As JP Morgan analysts wrote this week: “We have recently responded to a number of calls from long-only investors who are or will soon be faced with the decision to buy or not. You’re here actions. “

The bank’s response?

“We recommend investors not to weight Tesla stocks in their portfolios in proportion to the S&P because Tesla stocks are in our opinion and by virtually all conventional measures not only overvalued, but dramatically.”

Tesla shares closed at $ 627 on Thursday. As analysts led by Ryan Brinkman wrote, investors should “consider that in the two years since December 8, 2018 in which TSLA stocks have risen by + 808% and during which analysts have on average raised their target of 12-month rate of + 451%, analysts simultaneously lowered their Tesla EPS estimates for 2020, 2021, 2022, 2023 and 2024. ”

JP Morgan’s take-back comes as other Wall Street banks have developed Tesla’s more bullish outlook. Last week Goldman Sachs improved the neutral stock to buy, increasing their 12-month price target from $ 455 to $ 780. As Fortune wrote: “Goldman analysts cited a few reasons for their change of mind. They believe EV adoption is picking up steam due to falling battery prices faster than expected, combined with an increase in regulatory proposals to limit or ban the sale of combustion engines. internally over the next decades. As a result, analysts now expect EVs to account for 18% of global sales in 2030 and 29% in 2035 (with 50% adoption in 2035 in the US and Western Europe). “

Wedbush analyst Dan Ives also upgraded the stock,set a bull case objective of $ 800 to $ 1,000 on TSLA shares(His 12-month goal, meanwhile, is lower than Goldman’s at $ 560).

Indeed, betting against Tesla has been a trying proposition in 2020. FortuneAaron Pressman recently wrote: “Short sellers, including Enron conqueror Jim Chanos, lost so much money betting that Tesla’s stock price would collapse (it almost went up eightfold. this year) thatInstitutional investornicknamed him the ‘widow trade 2020“. By this month, the cumulative loss of shorters on Teslaoverwhelmed$ 35 billion. “

And while a Biden’s administration should be a boon for Tesla and his ilk, the main concern regarding the action remains the fact that the company depends too much on a decrease in sales of emissions credits, and that it simply cannot sell enough cars to justify its current market capitalization. As JP Morgan concluded: “We don’t think Tesla will reach about 2 times the combined size of Toyota and VW at the same margin (or 1⁄2 the size combined at 4 times the margin, or either of the other combinations of volume and margin. this could be reverse engineering “to justify the current valuation.

That’s why the bank has an “underweight” rating on the stock, with a target price of – yes, you read that right – $ 90.

More to read absolutely financial cover of Fortune:


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