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Before the bell: A look at Tesla’s turbulent week on the stock market

Source: Teslarati

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From the Model 3 delivery event to the Q3 earnings report, TSLA had quite the week on the NASDAQ.

The stock kicked off the week at a 1% increase after the Model 3 delivery event. As more of the information from the event resonated on Wall Street, the stock lowered a bit. While it was widely known that there would be levels of pricing, many were surprised at just how high some of the options went, expecting the whole shebang to cap out around $42,000 instead of the higher tiers the company offered. First photos of Tesla’s Model 3 online configurator revealed a starting price of $49,000 for first production cars and topping at nearly $60,000 for a fully optioned rear wheel drive version.

Adding to some of the week’s woes was news that the government incentives for the car are running out.

In previous securities filings, Tesla warned investors that changes to incentive programs “could have some impact on demand for our products and services.”

Combating the projections of some stock decreases is the fact that the Tesla Model 3 pricing is still pretty fair for the EV market. The Model 3 is one of the lowest cost EVs, while sporting one of the highest ranges on the market. By comparison, the Chevy Bolt that starts at $36,620 tops out at 238-miles of range while the premium Model 3 will have a 310-mile per charge driving range.

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Also adding to the good news on the Tesla side is that those who have tried the Model 3 are pleased with it.

A Business Insider journalist who got to drive it said, “I drove it for no time at all, but I’ve driven pretty much every other all-electric car you can buy, and I can safely say that the Model 3 has no competition.”

The second quarter earnings report presented a perfect alignment of revenue, Model 3 gains and overall capital, which led to an immediate 2% jump and another another 6% gain in after-hours trading. The after-hours action demonstrated that the initial reaction to the numbers for Q2 2017 was hugely positive, with the stock hitting $345.

The stock opened Thursday at $346.50, a bump from Wednesday’s closing in the mid-320s.

Analysts at Baird Equity Research still view Tesla Inc ‘s stock as a “top pick for 2017”, with the firm’s Ben Kallo maintaining an Outperform rating on TSLA and an unchanged $368 price target.

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Piper Jaffray Analyst Alexander Potter upped his price target for the EV company from $368 to $386 after the earnings call. Potter’s new price target implies an over 18% upside for TSLA, which has increased its price by over 50% since the start of 2017.

It isn’t smart to “bet against a story with this much momentum,” Potter told TheStreet.

It’s no surprise that analysts are more bullish than they were before after the earnings call and quarterly report where Tesla announced that it is “averaging over 1,800 net Model 3 reservations per day” since the handover event.

Automotive revenue slightly declined over the first quarter, while energy generation and storage grew 34%. Tesla attributed the gains in energy generation and storage to, “a greater percentage of cash sales and higher deployment of energy storage systems.”

Tesla also stated that, “Model S and Model X deliveries to increase in the second half of 2017, as compared to the first half of the year.”

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While Tesla expects the Model 3 to carry a negative gross margin in Q3, they are expecting it to go positive in Q4. In Q3 the overall automotive gross margin is expected to dip below 20%, currently at 27.9%, before recovering and growing in Q4 and beyond.

Hedge fund managers lost more than half a billion dollars because of their bets against Tesla, according to a CNBC report, so to say the stock created a shockwave would be an understatement.

Tesla closed yesterday at $347.09, a significant up from Wednesday’s $325.89.

It has been a wild week for the EV giant for sure. The stock should be a little quieter today and going into the weekend, but with CEO Elon Musk at the helm, a new game-changing announcement could come at any time.

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Investor's Corner

Piper Sandler raises Tesla (TSLA) target after China trip, cites robotics leadership

Analysts concluded that Tesla is still the benchmark that competitors rely on for innovation.

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Credit: Tesla Asia/X

Piper Sandler boosted its Tesla (NASDAQ:TSLA) price target to $500 from $400, maintaining an “Overweight” rating after a research trip to China. 

The firm cited Tesla’s leadership in artificial intelligence and robotics as central to its thesis, even as Chinese electric vehicle makers grow more competitive. Analysts concluded that Tesla is still the benchmark that competitors rely on for innovation.

A China visit

During its visit, Piper Sandler met with several Chinese EV manufacturers, many of which are vertically integrated and expanding rapidly. Analysts noted that these “fast followers” represent Tesla’s most significant competitive challenge. However, executives from multiple companies acknowledged Tesla’s foundational role in shaping the industry’s direction, TipRanks stated in a report.

One automaker told Piper Sandler that “without Tesla going from 0 to 1, we can’t go from 1 to 100,” highlighting the Elon Musk-led company’s enduring influence. Analysts said the remarks reflect both admiration and dependence on Tesla’s early innovations, particularly in areas such as battery integration, vehicle software, and AI-powered features.

Tesla’s leadership

Piper Sandler’s report emphasized that while Chinese automakers are formidable in design and production, they look to Tesla for advancements in “real-world” AI applications. Tesla’s focus on autonomous driving and robotics continues to distinguish it from competitors, making the company Piper Sandler’s top investment idea in this space.

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“Building AI-enabled machines requires data, talent, chips, and engineering prowess. Tesla compares favorably vs. the Chinese on all of these fronts,” Piper Sandler analyst Alexander Potter stated in a note. 

Piper Sandler also shared some of its expectations for Tesla this year, stating that it is estimating that the company will delivery ~495k vehicles this third-quarter, possibly attaining a new all-time record. The firm, however, stated that its 2026 outlook for Tesla is shakier, as the EV maker could just hit ~1.9 million units, which could include as many as 350k affordable “Model 2” vehicles.

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Investor's Corner

Tesla upgraded to Outperform at Baird on ‘physical AI’ outlook

Analyst Ben Kallo also raised Tesla’s price target to $548 from $320.

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Credit: Tesla China

Tesla (NASDAQ:TSLA) received a bullish nod from Baird this week, with the firm upgrading the stock to “Outperform” on expectations that the company is positioned to lead in what it calls the “physical AI” era. 

Analyst Ben Kallo also raised Tesla’s price target to $548 from $320, noting that despite muted quarterly results, shares have gained 24% in the past month, outpacing the S&P 500’s 3% rise.

Long-term milestones

The Baird analyst shared his insights in a note to investors. “Relatively muted stock reactions following a series of less-than-stellar quarters and investor inbounds regarding long-term initiatives lead us to believe focus has increasingly shifted to the future for TSLA. We now expect shares to ‘Outperform’ as TSLA is increasingly viewed as the leader in physical AI,” the analyst wrote in his note.

Kallo also pointed to Tesla’s ambitious roadmap as a key reason for the upgrade, as well as the company’s new proposed compensation plan for CEO Elon Musk. The package ties rewards to ambitious milestones, including the delivery of 20 million vehicles annually, the deployment of 1 million robots and 1 million robotaxis, and 10 million Full Self-Driving (FSD) subscriptions. 

Vehicles, robots, and energy

Baird’s scenario analysis suggested that Tesla could reach a valuation of more than $5.5 trillion by 2035 in its minimum case, with potential upside to $12 trillion and $3,000 per share if milestones are exceeded, as noted in an Investing.com report.

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Beyond Musk’s compensation framework, Baird highlighted multiple near-term catalysts for Tesla. These include potential updates on Optimus, the rollout of more affordable vehicles, new Robotaxi market entries, and an upcoming shareholder vote on Musk’s pay package. Expansion in Tesla’s energy storage and software businesses was also flagged as a growth driver. Kallo also described Tesla as having “lots of irons in the fire,” ranging from the scaling of the Semi to recurring revenue streams tied to software.

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Tesla called ‘biggest meme stock we’ve ever seen’ by Yale associate dean

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Credit: Tesla

Tesla (NASDAQ: TSLA) is being called “the biggest meme stock we’ve ever seen” by Yale School of Management Senior Associate Dean Jeff Sonnenfeld, who made the comments in a recent interview with CNBC.

Sonnenfeld’s comments echo those of many of the company’s skeptics, who argue that its price-to-earnings ratio is far too high when compared to other companies also in the tech industry. Tesla is often compared to companies like Apple, Nvidia, and Microsoft when these types of discussions come up.

Fundamentally, yes, Tesla does trade at a P/E level that is significantly above that of any comparable company.

However, it is worth mentioning that Tesla is not traded like a typical company, either.

Here’s what Sonnenfeld said regarding Tesla:

“This is the biggest meme stock we’ve ever seen. Even at its peak, Amazon was nowhere near this level. The PE on this, well above 200, is just crazy. When you’ve got stocks like Nvidia, the price-earnings ratio is around 25 or 30, and Apple is maybe 35 or 36, Microsoft around the same. I mean, this is way out of line to be at a 220 PE. It’s crazy, and they’ve, I think, put a little too much emphasis on the magic wand of Musk.”

Many analysts have admitted in the past that they believe Tesla is an untraditional stock in the sense that many analysts trade it based on narrative and not fundamentals. Ryan Brinkman of J.P. Morgan once said:

“Tesla shares continue to strike us as having become completely divorced from the fundamentals.”

Dan Nathan, another notorious skeptic of Tesla shares, recently turned bullish on the stock because of “technicals and sentiment.” He said just last week:

“I think from a trading perspective, it looks very interesting.”

Nathan said Tesla shares show signs of strength moving forward, including holding its 200-day moving average and holding against current resistance levels.

Sonnenfeld’s synopsis of Tesla shares points out that there might be “a little too much emphasis on the magic wand of Musk.”

Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever

This could refer to different things: perhaps his recent $1 billion stock buy, which sent the stock skyrocketing, or the fact that many Tesla investors are fans and owners who do not buy and sell on numbers, but rather on news that Musk might report himself.

Tesla is trading around $423.76 at the time of publication, as of 3:25 p.m. on the East Coast.

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