U.S. equity markets kicked off the week on a downbeat note as Wall Street contemplated heavy losses on Friday. Among the equities in focus are upstream energy company Linn Energy LLC (NASDAQ:LINE) and electric automotive giant Tesla Motors Inc (NASDAQ:TSLA). Let’s take a look and see what the analysts have to say about LINE and TSLA.
Linn Energy LLC
Raymond James analyst Rich Eychner emphasized his understanding of looming risks in Linn Energy, downgrading the stock from Market Perform to Underperform, without providing a price target. Linn Energy shares tumbled nearly 35% on Monday.
Eychner explained, “LINN signaled to the market that its financial health is deteriorating faster than we previously expected. Given the prolonged weakness in oil prices, and specifically the long dated portion of the curve, it seems that management is worried about having its borrowing base reduced to a level below its current outstandings.”
“However, given management’s decision to pursue strategic alternatives and fully drawdown its borrowing base, LINN’s time for an oil price recovery is shorter than expected. Therefore, given the heightened risk of equity dilution through a bond restructuring and the growing potential for LINN to be forced to declare bankruptcy, we are downgrading our rating,” the analyst continued.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rich Eychner has a yearly average return of -47.4% and a 0.0% success rate. Eychner has a -47.0% average return when recommending LINE, and is ranked #3331 out of 3584 analysts.
Out of the 5 analysts polled by TipRanks in the last 3 months, 4 rate Linn Energy stock a Sell, while 1 rates the stock a Hold. However, with a return potential of 203%, the stock’s consensus target price stands at $1.00.
Tesla Motors Inc
With Tesla preparing to release earnings on Wednesday, February 10, Stifel Nicolaus analyst James Albertine weighed in today with some commentary. The analyst reiterated a Buy rating and price target of $325 on the stock, which implies an upside of 120% from current levels.
Albertine wrote, “While we believe long-term strategy and opportunity remains intact for Tesla, there’s few short-term catalysts which would turn bears into bulls. Given management’s long-term focus, we suspect quality trumps speed with the new Model X. Does this suggest “falcon-wing” doors are the nail of the vehicle, as some automotive pundits have suggested? We suspect not. What it does mean is that TSLA, with only two vehicles (and a third on the way), cannot afford major defects, recalls, or further interruptions in the same way that most OEMs (with far too many products, in our view) can announce recalls without suffering lost share.”
The analyst continued, “Unfortunately for bullish, long-term minded onlookers like us, the care with which TSLA approaches each new Model X further delays return on investment and allows negative story lines to flourish. Our sense is updated guidance may be lower than the 80-85k units they are anticipating in 2016, which could drive further sell-off in shares. We also expect management will deflect on cash flow questions given ramping needs for the Model 3 sedan and the Gigafactory. Will this matter once the Gigafactory is up and running and the Model 3 demonstrates it can be the 3-Series killer bulls expect? Probably not, but it likely does not help valuation discussions near term.”
According to TipRanks.com, analyst James Albertine has a yearly average return of -7.2% and a 30.6% success rate. Albertine has a -22.9% average return when recommending TSLA, and is ranked #3129 out of 3584 analysts.