Tesla (NASDAQ:TSLA) stock has been on a terrific run since its third-quarter earnings. The stock has risen by 109% in the past six months. With the run-up, Wall Street analysts seem divided on the stock. While CFRA and Baird have downgraded Tesla stock, Piper Sandler, earlier known as Piper Jaffray, and Argus Research have raised their target price on the stock.
Piper Sandler is still bullish
Piper Sandler analyst Alexander Potter has raised its target price on Tesla stock from $423 to $553. In December, he called Tesla a “must-own” stock. At that time, Piper Sandler had also raised the target on the stock from $372 to $423. Notably, with the incredible rally in the stock, Tesla achieved the target within just a month of the change.
Potter is upbeat on Tesla’s growth route. According to a MarketWatch report, in December, he acknowledged the company’s loyal customer base. Potter was also impressed with the company’s capabilities, which included “high-volume manufacturing, impressive opex control, and frugal capital spending.”
Notably, Potter has high hopes for Tesla’s Cybertruck. He thinks that the company can sell about 200,000 units of Cybertruck by 2023. He thinks that Cybertruck is far better than other pickup trucks in the market.
Not all analysts are bullish on Tesla stock
According to a CNBC report, Baird has downgraded Tesla stock from “outperform” to “neutral.” CFRA has cut Tesla from “hold” to “sell.” The steep rise in Tesla’s stock price might have prompted these firms to make a call on the rating change. Baird recommended that investors book profits in Tesla stock.
According to the CNBC report, Bernstein’s Toni Sacconaghi said, “We have become incrementally cautious on the stock, given its huge recent surge in price.” Read Is Tesla Stock Heading for a Crash? to learn about the stock’s position after the recent rally.
Besides, Sacconaghi seemed concerned about Tesla’s margin. He expects Tesla’s margin to be weak in the fourth quarter. Also, he expects the company to face the impact of changes in EV (electric vehicle) incentives in the US and the Netherlands in the first quarter of 2020.
According to a Business Insider report, CFRA’s Garrett Nelson had concerns about Tesla after its record deliveries of 112,000 for the fourth quarter. While Nelson acknowledged the company’s growth drivers for 2020, including the ramp-up of Model 3 and the start-up of Model Y, he was concerned about the sustainability of Tesla’s gross margins.
Nelson thinks that Tesla will face stiff competition in the US and China. In the current year, he expects the launch of at least 25 new EV models in the US, which will be eligible for the full federal tax credit. In China, the company is already lowering prices to make Model 3 competitive.
Watch out for a forecasted rise in earnings
Tesla has started marching on its growth path. The company has drivers in place that could boost its earnings in the next three years. Wall Street analysts expect Tesla’s EPS to rise to $5.9 in 2020, $12.2 in 2021, and $17.7 in 2022, which shows stupendous earnings growth. While analysts expect Tesla to switch to profits in 2020, they expect its earnings to grow by 107% and 46%, respectively, in 2021 and 2022. So, the company looks well placed on the earnings growth trajectory.
In 2020, increased Model 3 production in China and the rollout of Model Y in the US will boost Tesla’s volumes and revenues. In the next few years, Model Y production in China and Gigafactory 4 in Germany could add to the company’s volumes. Also, Tesla has plans to produce Model 3 in Europe. Besides, the rollout of Cybertruck could bring in a new era of growth for the company.
To learn more, read Jim Cramer Is Bullish on Tesla Stock.