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Morningstar Research Updates Tesla Price Target by 25%

by Christopher Larson February 25, 2020

Morningstar Research Updates Tesla Price Target by 25%

 

Yesterday, David Whiston of Morningstar Research Group raised the firm's Fair Value Estimate for Tesla by 25% to $471 per share. The well-deserved raising of the price target would be respectable, were it not for two things: most institutions and analysts agree Tesla is worth much more than $471 per share, and this upgrade is months too late. 

 

As of 9:45 EST, Tesla (NYSE: $TSLA) stock traded at $846.78 per share,up 1.56% from yesterday's close, as opposed to the S&P 500 Index, which weighed in at $3,235.56, up 0.30% from yesterday's close.

 

Tesla is not impervious to the woes of global economic fears. Of the past three days, the S&P 500 Index closed red all three days, with a combined loss outweighing all year-to-date gains. Simply put, anyone who invested in the S&P 500 on 1 January, 2020 now has a negative return on their investment. 

 

Tesla investors should remember to keep the past three days' losses in perspective: on the first trading day of 2020, Tesla stock closed at $430.26 per share. This marks a year-to-date gain of more than 90%, as compared to the S&P 500, which is now representing year-to-date losses of 0.9%. 

 

For those that are visual learners, here is a graph showing the comparison in returns between the two securities:

 

 

Morningstar's price target raise would be more appreciated if it came sooner, or if the target was higher. In late January, nearly a dozen analysts raised their price targets for Tesla, including Credit Suisse, JP Morgan, Wolfe Research, Deutsche Bank, and ARK Invest, raising their price targets by a mean of 48%. Morningstar's raised its price target by nearly half the amount of other firms, and more than a month after the majority of the institutions. 

 

Morningstar, unfortunately, has long since seemed bearish on its analyses of Tesla. It rates the company as one star out of five in terms of opportunity. Morningstar also asserts that Tesla will face demand issues due to the phasing-out of federal tax credits, and that Tesla's debt is a looming challenge to face. 

 

Both of these justifications are quite off, given that even without federal tax credits, sales are increasing seemingly exponentially, and that Tesla has one of the lowest debt to market cap ratios of any mass automaker. 

 

In fact, Morningstar's fair value estimate is even more curious given that they estimate 580,000 deliveries this year, 780,000 next year, and 1,000,000+ in 2022. Throughout their report, Morningstar reiterates estimates that are in line with Tesla's IR guidance and some prominent Tesla bulls. 

 

 

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Cover image used courtesy of Christopher Larson / renewablethreads.com

Legal Disclaimer --

This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Christopher Larson, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Christopher Larson holds one share of Tesla, Inc., and currently (at the time of this article's publishing) holds no options or securities in Tesla Inc. and/or its affiliates.

 

 




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