JPMorgan Analyst Outlines Bank's Future Projections for Tesla's Stock Performance

JPMorgan Analyst Outlines Bank’s Future Projections for Tesla’s Stock Performance

Following a mixed earnings report last week, an analyst reiterates a recommendation for Tesla’s inventory. Tesla (TSLA) – Get Free Report has seen its share value rise steadily since the beginning of the year. During an earnings call on Jan. 25, CEO Elon Musk sounded upbeat about the stock. After beginning the year at $108.10 on January 3, shares ended at $144.43 that afternoon.

The fourth-quarter gross sales margin was 23.8%, below projections of 25.4%, according to the release of the results. The automobile gross sales margin was 25.9%, falling short of expectations of 28.4%. Nonetheless, Musk noted that Tesla’s January orders were as strong as ever and at double the rate of global production.

“We truly have the capacity to accomplish 2 million vehicles this year if it’s a seamless year, without any significant supply chain stoppage or massive difficulty,” he said. “We’re not committing to it, but that’s the possibility.”

Tesla announced price decreases ranging from 6% to 20% for its Model 3 and Model X sedans, as well as the Model Y SUV, on January 13.

The stock reached a year-to-date high of $177.90 on Jan. 27, but was selling down on Jan. 30 after a JPMorgan analyst reissued a promote rating with a price target of $120.

“Tesla’s slower trend and below-consensus adjusted automotive gross margin come before the effect of major price cuts, which will predominantly be realised starting in the first quarter,” JPMorgan’s Ryan Brinkman said in a customer note. “As a result, we see the margin trend as negative and anticipate consensus margin forecasts to fall.”

“While both technological and execution risk seem to be far lower than was previously anticipated, growth into bigger volume areas with lower price points appears to be laden with increased risk related to demand, execution, and competition,” Brinkman wrote. “Meanwhile, valuation looks to be pricing in upside associated with Model 3 penetration into mass-market areas far above our volume expectations.”