Tesla bearish analyst waves the white flag as TSLA surges into record territory

Tesla Model 3 production line in Gigafactory 3, Shanghai, China. (Credit: Tesla)

Since announcing its impending 5:1 stock split, Tesla stock (NASDAQ:TSLA) appears to have gained momentum, opening above its record close of $1,643.00 on Friday. Amidst this, another bearish Tesla analyst appears to have thrown in the towel, giving the company an upgrade and a more optimistic price target.

In a recent update, Bank of America analyst John Murphy upgraded TSLA shares to the equivalent of “Hold” from “Sell.” Even more surprisingly, Murphy, who has exhibited a rather bearish stance on the company, also doubled his price target for TSLA from $800 to $1,750 per share. The BoA analyst’s updates came as Morgan Stanley’s Adam Jonas, who has also become quite bearish in recent months, also raised his TSLA price target from $1,050 to $1,360 per share.

According to the Bank of America analyst, part of his optimistic outlook on Tesla is due to the company’s “unfettered access to capital.” Murphy maintained that Tesla’s total production of about 500,000 vehicles over the last 17 years is “uninspiring progress,” but several key factors have proven to be notable in raising TSLA’s price. These include “Musk’s leadership, a compelling brand, and improved execution.”

With this in mind, the Bank of America analyst stated that Tesla has access to low-cost capital, which is a “key advantage” that could very well “accelerate growth to almost 50% per annum over the next five years.” This is a notable about-face for the analyst, considering that Murphy has proven to be quite skeptical of Tesla in the past.

Just this past April, for example, Murphy downgraded Tesla from “Neural” to “Underperform” and cut his TSLA price target from $500 to $485 per share. TSLA stock was trading at about $600-$700 per share then. In a note, the analyst stated that while Tesla remained a trailblazer in the electric vehicle segment, the company was facing challenges due to production, burnout of new models, cash burn, and upcoming competitors from rival carmakers.

“However, Tesla faces several hurdles, including: 1) ongoing/future production challenges, 2) spike/ burnout pattern for new models, 3) continued losses/cash burn from low production/deliveries, elevated cost, and new facility construction, and 4) the prospect of new competition and technology/model obsolescence,” Murphy wrote.

Tesla has since proven its strength with its profitable second quarter. And with the upcoming Battery Day event, the company may very well be heading towards yet another catalyst. Over the past two sessions alone, TSLA stock has soared nearly 18%, and it opened at record levels on Friday. The company has also broken the $300 billion mark, establishing its place as the world’s most valuable automaker by market cap.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Simon Alvarez: Simon is a reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday.
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