As Tesla Motors Inc (NASDAQ:TSLA) prepare for their big event tonight, unveiling the Model 3, Credit Suisse analyst provides his positive expectations on the new model. Meanwhile, rising competition in the mobile-browser payments arena for Paypal Holdings Inc (NASDAQ:PYPL), and industry commentary regarding the acquisition of the company by Google has compelled Piper Jaffray analyst to provide a bearish stance on the stock.
Tesla Motors Inc
The Model 3, Tesla’s long anticipated, more affordable model is expected to unveil tonight at 08:30PM Pacific Reserve. As excitement builds up for a model that is still far from hitting the road, analysts evaluate the impact of tonight’s event on the company’s stock. Credit Suisse analyst Dan Galves reiterated a Buy rating for the stock and set a price target of $240.00, his explanation follows.
The analyst’s evaluation isn’t necessarily centered on the features of the model, but rather, on speculative numbers for how this unveiling will serve as a catalyst for Tesla. The analyst explains, “We don’t expect much incremental information about the car vs what Tesla has already said… a dynamic that has typically resulted in “sell the news” price action.” He continues, “However, the real catalyst from the Model 3 unveil will be the first indication of demand for the car, in terms of initial reservations…and we think this will be a positive surprise.”
This event will aid in reaching an expected reservation demand of 100,000+ in the first weeks. These reservations come from two key population pools as stated by the analyst; the current owners of Model S and X, and those who have test driven the Model S but can’t afford it ($70,000). The analyst explains, “Of the consumers who testdrive Model S, we estimate that only about 15% actually buy the car (typical auto dealer conversion rate is ~50%).” Model 3, however is expected to sell at half the price without sacrificing the best features.
Lastly, Galves mentions other catalysts for the stock including a Model X ramp, positive Model X reviews, and the company likely meeting its Q1 delivery expectations. The analyst says, “We believe the near-term risk / reward remains positive.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Dan Galves has a total average return of 11.5% and a 57.5% success rate. Galves has a 17.5% average return when recommending TSLA, and is ranked #485 out of 3775 analysts.
As of this writing, out of the 16 analysts who have rated the company in the past 3 months, 8 gave analysts Tesla a Buy rating, 3 remain on the sidelines, and 5 gave the stock a Sell rating. The average 12-month price target for the stock is $246.86, marking a 8.80% upside from where shares last closed.
Rumors about Apple stepping into the mobile-browser payments arena with its payment platform, Apple Pay, and industry commentary on a Google acquisition of Paypal have been a raising concern for PiperJaffray analyst, Gene Munster. The analyst’s last report emphasised the threat of Apple Pay to Paypal’s total payments volume in the mobile-browser sector. The analyst adds his thoughts on the alleged acquisition of Google, ultimately reiterating a Sell rating with a $33 price target.
Regarding Paypal’s acquisition, the analyst states, “Recent industry commentary indicating a card network or Google may buy PayPal appear unsubstantiated and wishful; we find it difficult to justify belief that there is a meaningful probability that PayPal is acquired.” He explains, “Given the company’s historical acquisition patterns; between paying $55B-$60B for PayPal and growing an organic business, we believe Google would favor an organic build.” Munster adds, “we believe that these companies would be even more sheepish around such a massive acquisition given the potential for oncoming assaults from new competition.”
Speaking of competition, the analyst refers back to the rumors on Apple stepping into the mobile-browser payments arena. Munster repeats, “We believe ~20% of PayPal’s TPV is conducted on mobile iOS devices, a sizeable portion of PayPal’s business that, for the first time, will face competition.” He comments, “We believe there is potential for preferential treatment for Apple Pay”.
He concludes, “We continue to believe that PYPL remains overvalued relative to long-term headwinds from competition and, despite recent commentary from industry participants and pundits, we believe there is a low probability of acquisition.” He continues, “Our long-standing concerns over competition were validated last week when Re/code reported that Apple is planning on expanding Apple Pay into the mobile browser before the upcoming holiday season.”
According to TipRanks, Gene Munster has a 65% success rate, and delivers an average return of 19.3% per recommendation. Out of the 20 analysts who have rated the company in the past 3 months, Munster gave TSLA a Sell rating, whilst 13 gave TSLA a Buy rating and 6 remain Neutral. Overall, all recommendations amount to a 12-month average of $41.89, marking a 7.30% upside from where shares last closed.