BofA Upgrades Tesla, Doubles Price Target; Says Growth Story Could 'Carry The Day'
With the stock up 600% in the past year, another one Wall Street bear threw in the towel on Tesla Inc (NASDAQ: TSLA) on Friday.
The Tesla Analyst: Bank of America analyst John Murphy upgraded Tesla from Underperform to Neutral and raised his price target from $800 to $1,750.
The Tesla Thesis: Murphy said he is still skeptical of Tesla’s long-term fundamentals, but the stock’s growth story has gotten a huge boost due to its access to low-cost capital. Murphy said Tesla is experiencing a self-fulfilling capital spiral in which momentum in Tesla’s share price creates an opportunity to raise cheaper capital which drives Tesla’s share price higher.
“While we remain skeptical that TSLA will be the dominant EV automaker in the long-run, if a big global footprint can be built with no-cost capital, the ‘growth’ story would carry the day for the stock,” Murphy said in the note.
See Also: Morgan Stanley Goes All-In On Tesla Battery Day, Upgrades Stock
Murphy said Tesla’s unlimited access to capital should clear the path for Tesla to accelerate its revenue growth rate to 50% annually over the next five years. However, he said Tesla’s track record of growth and profitability up to this point is “uninspiring” given the company hasn’t reached 500,000 unit sales per year after 17 years in operation.
Murphy is projecting $11 in EPS for Tesla in 2020, and $13.50 in EPS in 2021.
He said given the current interest rate climate and Tesla’s skyrocketing share price, the company should have no problem executing further equity raises to fund its growth investments in the coming years.
Benzinga’s Take: With funding concerns seemingly eliminated, Tesla has no excuse for missing its growth targets. Tesla is hoping to produce 500,000 vehicles in 2020, two years behind its original target.
Tesla's stock traded around $1,650 at the time of publication.
Latest Ratings for TSLA
Date | Firm | Action | From | To |
|---|---|---|---|---|
Aug 2020 | B of A Securities | Upgrades | Underperform | Neutral |
Aug 2020 | Morgan Stanley | Upgrades | Underweight | Equal-Weight |
Aug 2020 | Citigroup | Maintains | Sell |
View More Analyst Ratings for TSLA
View the Latest Analyst Ratings
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