Jefferies analysts raised TSLA shares to 'Buy'. The company is encouraged by the commitments of the governments of Europe and China in the field of public policy to support the sale of electric vehicles.
Today, TSLA stock price have risen and, at the time of writing the article, were at $510 per share. Jefferies analyst Philippe Houchois upgraded Tesla from 'Hold' to 'Buy', but cut his price target from $800 to $650.
He writing that while low gas prices could be a headwind to customer demand in the near term, he's encouraged by "continued public policy commitment to supporting [electric-vehicle] sales" in Europe and China.
"US demand at risk near term from low gas prices but EVs mandated elsewhere and storage critical. Post est. cut (industry scenario), we see Tesla growing volume 25+%, with earnings and FCF supported by better productivity, stable ASPs and ZEV income."
Houchois also arguing that Tesla's balance sheet should remain in "solid shape" despite disruptions to the company inventories and receivables at the end of the first quarter due to the COVID-19 outbreak. "Looking further out, we see Tesla's ability to attract capital as a strong positive as pressure on the industry's transformation accelerates," he wrote.
Despite reducing Tesla’s estimates, the analyst still sees 2020 revenue growth of 27%. The company’s earnings and free cash flow will be supported by better productivity, stable average selling prices and income from zero-emission vehicle credits. Tesla is the only legacy-free carmaker and is participating in a positive EV sum-game, contends the analyst. Further, post COVID-19 crises, Houchois expects higher consumer support for energy efficient transport.
He said the company had four major advantages in the long term:
- As the auto industry transitions to electric over time, Tesla will not have to deal with the upgrade costs that the legacy automakers do.
- Not only is Tesla gaining market share from legacy automakers, EVs are a positive-sum game.
- Tesla is roughly “doubling market coverage with Model Y.”
- Tesla is leading an auto technology revolution.
Another analyst, Ben Kallo from Baird, in a new note to clients, he said that he believes “new products and geographies driving growth, a potentially widening electric-vehicle competitive advantage, and over-the-air updates keeping vehicles fresh” will help Tesla fair better than the rest of the industry amid this crisis.
Featured image: Slashgear
Disclosure: I do not own TSLA shares and do not intend to buy them in the next 72 hours.
About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.