Musk in Hot Water With SEC Again, But This Analyst Still Sees 30% Upside for Tesla (TSLA) Stock


Tesla (TSLA) founder and CEO Elon Musk is in hot water yet again.

The SEC on Monday asked a judge to place Musk in contempt, following a February 19th tweet which the government agency says violated an agreement between the two parties. The deal called for prior approval before Musk tweeted “material” information for Tesla shareholders; in his Feb 19th tweet, Musk said, Tesla  “will make around 500k” vehicles in 2019, which is 100k more than company guidance. While Musk later clarified his tweet (saying the company will achieve a 500k/vehicle production rate), the SEC stands by its initial accusation that the CEO violated terms of their deal.

Though Wedbush analyst Daniel Ives says “another boxing match with the SEC is the last thing investors wanted to see,” he maintains his Outperform rating and $390 price target, which implies about 30% for the stock. (To watch the Ives’ track record, click here)

Ives points out that “Tesla is…in such a pivotal period with Musk & Co. trying to ramp up Model 3 production/demand for China/Europe, and thread the needle to profitability with roughly $1.5 billion of debt to be paid this year.” The SEC investigation — as it was last year — is a massive distraction for the company and “will be a near-term overhang on shares until investors can better gauge the impact.”

Investors were satisfied when “Tesla/Musk [settled] with the SEC in October [as the] black cloud was in the rear view mirror for the company (and investors).” But Ives says this “latest tweet (which most investors shrugged off at the time) represents a wild card that could potentially bring this tornado of uncertainty back into the Tesla story until resolved.”

Ives believes the “company navigates one of its most challenging periods in its history and certainty did not need this news.” He says he will be “watching the next steps in the courts closely over the coming days, although right now for Tesla (and investors) the demand story for Model 3 in Europe and ramping in China remains the major task at hand for 1H19 success with our view that the company can successfully transition from a production story to a demand story in 2019 despite the speed bumps and growing noise on the horizon.”

Tesla does not need distractions. The company has many, many challenges in regards to production, demand and pricing, and many analysts aren’t sold on the company at this moment. TipRanks analysis of 23 analyst ratings on the stock shows a consensus Hold rating, with eight analysts recommending Buy, six recommending Hold and nine Selling. There is an average price target of $323.52 on the stock, representing an 8% upside. (For more insights on TSLA, get a free research report)

 

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