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Why This Analyst Dropped a Bomb on Tesla (TSLA) Stock


J.P. Morgan analyst Ryan Brinkman is out today with a bearish note on shares of Tesla (NASDAQ:TSLA), noting that while Tesla appears to be exploring a going private transaction, he believes that such a process appears much less developed than he had earlier presumed.

As such, Brinkman reiterates an Underweight rating (i.e., Sell) on TSLA, while slashing the price target to $195 (from $308), which reflects a potential downside of 37% from last closing price.

Brinkman noted, “A going private transaction is clearly possible, which could potentially provide upside to the shares, but that such a process appears much less developed than we had earlier presumed. When Mr. Musk tweeted on August 7 that, “Only reason why this is not certain is that it’s contingent on a shareholder vote,” we had presumed that a formal proposal had been received from another party, that funding had been secured for that formal proposal, and that the Board was at least informally supportive of the formal proposal. Given our updated interpretation that none of these three presumptions are currently the case, we feel it is appropriate at this time to remove the 50% weighting we had briefly assigned to a going private transaction, and instead return to our previous fundamentals-based valuation approach.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ryan Brinkman has a yearly average return of 13% and a 64.4% success rate. Brinkman has a -15.8% average return when recommending TSLA, and is ranked #353 out of 4856 analysts.

The battle seems to be torn between the bulls and bears as TipRanks analytics demonstrate the electric car giant as a Hold. Based on 25 analysts polled in the last 3 months, 10 rate a Buy on Tesla stock, 7 maintain a Hold, while 8 analysts have issued a Sell. With a return potential of nearly 8%, the stock’s consensus target price stands at $333.53.