- Tesla (TSLA) might be one of the most polarizing stocks in the market right now. Along with investors, analysts are also divided on its outlook.
- Tesla’s price targets vary from a low of $0 to a high of $4,000. Meanwhile, it’s been on fire in the fourth quarter after underperforming the markets in the first three quarters of the year. Let’s discuss some analysts’ views on Tesla.
Tesla’s price targets
According to the data compiled by Thomson Reuters, 11 analysts have “buy” or higher ratings on Tesla stock, while 13 have “sell” or lower ratings. The remaining nine have rated TSLA as a “hold” or equivalent. It’s not uncommon for analysts to have diverging views on a particular company. However, in Tesla’s case, analysts’ opinions are starkly divided.
It’s also not uncommon for analysts to have different price targets. However, when it comes to Tesla stock, its price target varies from a low of $0 to a high of $4,000. I can’t imagine another stock with such a wide price range. But we are talking about Tesla. It’s no secret that investors and analysts tend to harbor strong opinions.
Could the stock fall to $0?
Business Insider reported in September that Ed McCabe, head of equity trading at Highbridge Capital Management, has a $0 price target on Tesla stock. He called TSLA a “structurally unprofitable and horribly managed company.” Meanwhile, TSLA has soared since the report was published. While McCabe scoffed at Tesla $40 billion market cap, the metric has now soared beyond $60 billion. TSLA’s surprise third-quarter profit, solid response to the Cybertruck, and short squeeze have lifted its stock. More recently, reports that China will offer subsidies to some Tesla cars have given it a boost.
Morgan Stanley sets $500 bull case price target
Morgan Stanley, which is otherwise neutral on Tesla stock, recently raised its bull case target price to $500. It listed strong incremental sales in China as one of the reasons for raising its target price. Read Can Tesla Stock Rise to $500 with China’s Help? for more analysis. Meanwhile, one fund manager has put a lofty $4,000 price target on TSLA.
Can TSLA reach $4,000?
CNBC reported that Catherine Wood, CEO and founder of Ark Investment Management, feels that Tesla stock could rise to $4,000 in the next five years. Her worst-case scenario also puts the stock at $700 in five years—more than double its current price. In my view, for Tesla to rise to $4,000 in five years, a lot of pieces will have to fall into place.
Firstly, global EV (electric vehicle) sales will have to increase sharply from these levels, and Tesla must maintain its market share—or at least not let it fall too much. On that note, automakers such as Ford Motor Company (F) and Volkswagen are betting big on EVs and could give Tesla a run for its money.
Despite all the noise, EV sales have been reliant on government help. After China rolled back subsidies this year, its EV sales tumbled. In the absence of subsidies, EVs might not become a mass-market product given their price differential with internal combustion engine cars. However, price parity through technological advancements might help Tesla as well as the EV industry.
Furthermore, TSLA still needs to sell its cars at sustainable profits. Though the company talked about sustainable profits on its third-quarter earnings call, at least some bears weren’t impressed. Technology has also been evolving in terms of alternate-energy vehicles. For example, Toyota is also betting on hydrogen fuel cell cars. Read Musk Sets Battery versus Hydrogen Debate in Motion for more info.
At the end of the day, Tesla is easily one of the most fascinating and polarizing companies around. Changing views about Elon Musk can also dictate the decision-making process for some. Read Tesla: Hard to Ignore for Both Bulls and Bears to see what makes Tesla so polarizing.