Two Colins from the Street are offering financial savvy from divergent perspectives with regards to Tesla Inc (NASDAQ:TSLA) and Amazon.com, Inc. (NASDAQ:AMZN). While one analyst recognizes exciting sparks of potential with Tesla’s evolving business model, with opportunities to dabble in transportation, energy, and ADAS technology, ultimately he screeches his wheels to a halt on the sidelines amid high risk. Conversely, one of Wall Street’s best analysts approaches Amazon from a more enthused perspective, bullish on the Souq.com acquisition that could fast-track Amazon to the top of the leader board of the Middle East e-commerce market. Let’s take a closer look:
When Operating Leverage Is Just a Pipeline Dream, Stay Cautious on Tesla
Though Oppenheimer analyst Colin Rusch assesses Tesla’s battery pack and drivetrain business to be of prospective meaningful value circling $15 to $20 billion by the year 2020, he draws a distinct line between significant potential and reality.
“Taking stock of the fantasy,” the analyst sizes up a path “fraught with risk,” even as the electric car giant continues to grow and make “clear forward progress.” Therefore, the analyst reiterates a Perform rating on shares of TSLA without listing a price target.
“As TSLA’s business model continues to evolve and shares reflect the promise of potentially transforming the energy and transportation industries, we believe it is prudent to do two things on an ongoing basis. First, we believe tracking the progress of TSLA’s technology evolution/value is useful in determining value creation throughout an aggressive ramp. Second, we believe presenting five years of forward estimates is consistent with long-term holders’ target models. From a progress standpoint, we believe TSLA has created meaningful value through its brand, ADAS technology, and commercializing EV drivetrains. However, operating leverage remains more promise than reality. We reiterate our Perform rating as we look for clear signals on Model 3 ramp progress, potential for new strategic partnerships/investments, and concerns about execution risk,” Rusch concludes.
Taking under account the giant’s capital raise intentions, the analyst has tweaked his EPS forecast from ($0.42) to ($0.44) for the financial year of 2017 as well as from $2.98 to $3.04 for the financial year of 2018.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Colin Rusch is ranked #654 out of 4,549 analysts. Rusch has a 45% success rate and realizes 8.1% in his annual returns. When recommending TSLA, Rusch yields 96.0% in average profits on the stock.
TipRanks analytics show TSLA as a Hold. Out of 16 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 5 remain sidelined, and 6 are bearish on the stock. With a loss potential of 2%, the stock’s consensus target price stands at $246.67.
Amazon’s Souq.com Acquisition Has $10 Billion+ Potential
Baird analyst Colin Sebastian is weighing in on Amazon as the rumor mill buzzes with enthusiasm regarding the online auction and e-commerce leader’s prospective acquisition of the key online retailer serving the Middle East and North Africa, Souq.com.
From Sebastian’s eyes, this deal could unlock “access to fast-growing emerging markets” In reaction, the analyst reiterates an Outperform rating on AMZN with a price target of $850, which aligns with current levels.
Sebastian notes, “With a purchase of Souq, we believe that Amazon would obtain a strong local brand, an early leadership position in the Middle East e-commerce market, and a large team with plenty of local expertise, for example in managing payments. We note that Amazon acquired the Chinese e-commerce company joyo.com to establish a beachhead in China in the early days of online shopping, and we believe can take lessons from that experience to better manage the growth opportunity in the Middle East. Moreover, Amazon is clearly interested in tapping into growth in emerging markets – with the recent launch of site and fulfillment in Mexico, as well as the significant investments in India.”
“According to local estimates, the online commerce market in Middle East/Africa may already be greater than $10 billion per year, and growing 30% annually. Along with India, MENA would offer Amazon Retail another billion-dollar regional revenue opportunity within a relatively short timeframe,” Sebastian surmises.
Colin Sebastian has a very good TipRanks score with a 77% success rate and a high ranking of #14 out of 4,549 analysts. Sebastian garners 19.4% in his annual returns. When recommending AMZN, Sebastian collects 36.8% in average profits on the stock.
TipRanks analytics demonstrate AMZN as a Strong Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 27 rate a Buy on AMZN while 1 maintains a Hold. The 12-month average price target stands at $939.28, marking a nearly 11% upside from where the stock is currently trading.