Nomura Analyst Pounds the Table on Tesla (TSLA)


Nomura analyst Romit Shah was out pounding the table on Tesla (NASDAQ:TSLA) Wednesday, reiterating a Buy rating and price target of $450, which implies an upside of 49% from current levels. (To watch Shah’s track record, click here)

Tesla stock has lost all of its gains from 2018; it started the year at $311, reaching a high of $373.73 as recently as June 18, but now has dipped to trade just above $300.

However, Shah expects improving fundamentals in Q3, consisting of a step-function up in revenue growth and positive operating leverage, which could drive shares higher.

Shah wrote, “We believe the operating leverage in the Tesla model is much greater than many investors realize. Last month the company laid off almost 10% of its workforce. In addition, we met with Tesla in June, whereby the company indicated that it is managing opex and capex more efficiently. As such, we are raising our EPS and FCF estimates for 3Q and 4Q18. Our revenue/EPS estimates rise from $6.1bn/-$0.51 to $6.4bn/$0.86 in 3Q18E and from $7.4bn/$0.91 to $7.6bn/$2.46 in 4Q18E. Further, our free cash flow estimate goes from -$62mn to $46mn in 3Q18E and $245mn to $246mn in 4Q18E.”

Furthermore, the current short interest reflects a strong belief that Tesla faces insolvency over the coming periods due to its strained balance sheet. However, the analyst believes that if Tesla can execute to plan, the narrative around bankruptcy risk will go away, thereby reducing short interest and driving the stock higher.

That said, the voice of the Street doesn’t back Shah’s bullish stance on the electric car giant, with TipRanks analytics demonstrating TSLA as a Hold. Based on 24 analysts polled in the last 3 months, 9 rate a Buy on Tesla stock, 7 issue a Hold, while 8 recommend a Sell on the stock. The 12-month average price target stands at $299.63 marking a slight downside from where the stock is currently trading.

 

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