A Glimpse Into Tesla Inc (TSLA) Opportunity in the Machine Learning Space, Alphabet Inc (GOOGL) Marketing Next Conference


What does the future hold for Tesla Inc (NASDAQ:TSLA) and Alphabet Inc (NASDAQ:GOOGL)? Analysts weigh in on the two giants, providing commentary on Tesla’s Advanced Driver Assist System (ADAS) in context of valuation, and highlighting key takeaways from Google’s Marketing Next conference in San Francisco. Let’s take a closer look:

Tesla Opportunity – Machine Learning

With Model 3 production starting from July, there has been a great deal of discussion about how it will impact the company’s Advanced Driver Assist System (ADAS) and efforts around machine learning.

While Tesla’s technology appears to be behind Mobileye from a functionality perspective, Oppenheimer analyst Colin Rusch sees the potential for TSLA to have a significantly higher value if it controls the machine learning aspect of the product development. “We believe that a successful ramp of the Model 3 is precursor to considering additional value from TSLA’s ADAS offering. As we see high-volume rollout of Model 3, we anticipate reviewing this component of our valuation methodology,” Rusch noted.

The analyst cited two reasons of why he believes Model 3 is critical to TSLA’s ADAS position:

  1. TSLA’s ability to accelerate learning cycles related to characterizing driving behavior is facilitated by high volume rollout of Model 3, but the ability to process that data and create driving applications appears nascent and the challenge is extensive.
  2. We believe leveraging consumer balance sheets for its technology development is an underappreciated aspect of the business. Should the Model 3 ramp on schedule, or even late as most investors expect, we believe the cost effectiveness and time to learning are critical advantages for TSLA.

However, Rusch remains sidelined on Tesla shares, reiterating a Perform rating.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Colin Rusch has a yearly average return of 4.7% and a 45% success rate. Rusch has a 96% average return when recommending TSLA, and is ranked #1175 out of 4560 analysts.

Out of the 23 analysts polled by TipRanks (in the past 12 months), 8 rate Tesla stock a Buy, 9 rate the stock a Hold and 6 recommend to Sell. With a downside potential of 16%, the stock’s consensus target price stands at $259.33.

Google Marketing Next ’17 Highlights

Google Marketing Next ’17 kicked off yesterday in San Francisco, where the internet giant announced new products and improvements for advertisers and marketers. Subsequently, Wells Fargo analyst Peter Stabler provides a few key takeaways from the conference:

  1. The key development here is that Google continues to roll out targeting capabilities that incorporate deeper and broader intent signals generated by a user’s past searching behavior, not just third-party website browsing. This is a blending of behavioral targeting (search and website browsing) that has not previously been offered to marketers.
  2. Google announced the extension of AMP to search landing pages. AMP is also being automatically extended to display ads across the Google Display Network, significantly reducing ad load times. We believe improvement in ad loading times and landing page experiences should yield improvement in CTRs and downstream conversions.
  3. Describing the need for “non-line assistance”, Google emphasized its commitment to improving the attribution of search and display campaigns across devices and contexts. The new “Google Attribution” product will be offered free to all Google advertisers, with enterprise users being migrated to the newly branded Google Attribution 360.

Overall, the analyst reiterates an Outperform rating on Alphabet shares, with a price target of $1150, which implies an upside of 18% from current levels.

According to TipRanks.com, analyst Peter Stabler has a yearly average return of 23.9% and a 80% success rate. Stabler has a 13.5% average return when recommending GOOGL, and is ranked #209 out of 4560 analysts.

The overwhelmingly majority of analyst still say GOOGL is a “buy.” The average forecast is for the stock to hit $1,056 in the coming months, according to data compiled by TipRanks.