Shares of Tesla Motors Inc (NASDAQ:TSLA) clocked in at $267.88 at the end of market close on July 7. This surprise 4% dip comes after more than three months of steady gains. Since bottoming out at $185 per share on March 27, the stock has significantly rebounded, closing last week at $280. Many firms agree that Tesla shares are about to explode, but some say it’s not necessarily the right time to buy.
Recently, Tesla has been hovering around its closing record high of $286.04 on September 4, 2014. Year to date, the stock is up 19% compared to the mere gain of 0.4% by the S&P 500 index. Furthermore, in just the last three months, the stock has skyrocketed over 30%. As of early morning trading on July 8, the stock is just shy of $260.
Pacific Crest analyst Brad Erickson downgraded Tesla to Sector Weight from Outperform on July 8, removing his price target. The analyst thinks valuation is “getting full” and noted there is a “high bar” for Tesla in the second half of 2015.
It is not that Erickson does not believe in Tesla, but merely that shares of the Palo Alto-based company have surged above its fair value. The downgrade reflects the massive rise in the price of Tesla shares over the last month, rather than any change in the company itself.
Erickson reports, “From root-level technology and manufacturing all the way to sales and marketing, distribution and executive management, Tesla’s differentiation relative to its peer group is nothing short of total.” He continues, “We simply believe the stock price now more fully reflects these core attributes.” Upside potential clearly remains, “but recent appreciation has created a more balanced risk/reward profile.”
This neutral rating comes just one week after Erickson visited Tesla’s factory in California. Erickson left with optimistic comments regarding Tesla’s Model X production line and new employees being trained to handle the influx of orders. However, he warned of the possibility that the Model X deliveries may be delayed, potentially resulting in a temporary drop in share prices.
When measured over a one-year horizon and no benchmark, Brad Erickson has an overall success rate of 82% recommending stocks, earning a +28.6% average return per recommendation. The analyst has rated Tesla a total of 10 times since August 2014 earning an 89% success rate recommending the stock and a +16.6% average return per Tesla recommendation.
Out of 13 analysts polled by TipRanks, seven analysts are bullish on Tesla, three are neutral, and three are bearish. The average 12-month price target for Tesla is $295.91, marking a 10.46% potential upside from where stock is currently trading. On average, the all-analyst consensus for Tesla is a Hold.
Cody Miecnikowski writes about stock market news. He can be reached at [email protected]