Jefferies analyst Phillipe Houchois has adjusted his 12-month price target for Tesla shares from $280 to $240 after the firm noted a miscalculation in the number of shares outstanding. The new price target for Tesla shares represents an aggressive 36 percent downside from Tuesday’s close.
The Wall St. firm issued a revised report Wednesday morning that corrects the number of Tesla shares outstanding used in the original valuation, from 139.6 million shares to 165.2 million shares outstanding in its note entitled “Erratum: Tesla and the Permanent Revolution.”
“This note corrects the PT from $280 to $240 due to an error in the DCF [discounted cash flow] share count – No other change,” reports the Jefferies analyst.
As shares of Tesla continue to trade at near all-time highs, Houchois has doubt that the Silicon Valley-based electric car maker can scale its vertically integrated business model.
“Achievements to-date and vision are impressive, but we don’t think Tesla’s vertically integrated business model can be scaled up as profitably and quickly as consensus thinks and valuation multiples imply,” wrote the analyst in his original note to clients.
Houchois’s miscalculation in Tesla’s valuation using a discounted cash flow method can be seen as a careless mistake that casts doubt on the firm’s credibility. Still, Jefferies stands by their downbeat view of Tesla.
“Given capital intensity, we don’t think DCF [discounted cash flow] can justify the current valuation, let alone upside,” he wrote. “We appreciate the growth upside from a brand whose reach goes well beyond auto markets and that valuing Tesla today assumes some form of ‘steady-state’ that is unlikely to happen anytime soon.”
What do you think of the adjusted price target of $240 for Tesla shares?
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