Tesla’s stock has been a rollercoaster ride for Wall Street analysts, with price targets and ratings constantly in flux. BofA Securities analyst John Murphy recently increased his price target on Tesla shares to $300 from $225, but the stock failed to respond positively, dropping almost 3% to $275.40. This discrepancy highlights the challenges analysts face when covering Tesla, a stock that seems to defy expectations and confound traditional metrics.
Murphy’s new price target is now one of the highest among major brokerages, just shy of RBC’s $305 target. Despite this bullish outlook, Murphy rates the shares as a Hold, even though he believes they could rise another 10% from their current levels. His price target revision is based on updated news estimates and changes to valuation multiples, with the new target representing 25 times his estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA), compared to the previous target of 20 times forward year EBITDA.
The disparity in price targets among analysts covering Tesla is evident when looking at the Buy ratings from Deutsche Bank analyst and Mizuho analyst Vijay Rakesh, whose price targets are $270 and $230, respectively. While their ratings indicate optimism, their price targets fall below the current stock price, which is uncommon in typical market scenarios.
Tesla’s stock currently sits significantly above the average analyst’s price target of around $217, with a difference of $60 or 28%. This level of deviation from the consensus is also atypical, as price targets for S&P 500 stocks usually range from 10% to 15% above the current trading price. This disparity highlights the challenge analysts face in predicting the trajectory of Tesla’s stock.
Analysts have been struggling to keep up with Tesla’s stock trading, which has seen a rapid increase of over $100 per share in just six weeks. The stock’s volatility is approximately three times that of Apple, making it difficult for analysts to accurately forecast its movements. In 2023 alone, Tesla’s ratings have changed 13 times, with three upgrades and ten downgrades. Comparatively, Apple’s ratings have only experienced five downgrades during the same period.
One reason for the high number of changes in Tesla’s ratings could be the stock’s popularity among investors. Tesla has the highest cumulative trading volume of any U.S. stock so far in 2023, with almost 20 billion shares exchanging hands. This popularity contributes to the stock’s atypical behavior and adds complexity to the work of analysts covering Tesla.
While Tesla’s stock presents challenges for analysts, it also presents opportunities. Its popularity and volatility can result in significant gains for investors who time their trades correctly. However, it is crucial for investors to approach Tesla’s stock with caution and carefully consider the differing opinions among analysts.
In conclusion, covering Tesla’s stock is no easy task for Wall Street analysts. The stock’s wild price swings, varying price targets, and high trading volume make it a challenging and unpredictable investment. Analysts should consider the unique nature of Tesla and its popularity among investors when providing ratings and price targets. Ultimately, investors need to exercise caution and conduct thorough research before making any investment decisions related to Tesla’s stock.
