Tesla Inc (TSLA) Divides the Street, NVIDIA Corporation (NVDA) Gets a ‘Sound the Alarm’ Downgrade


Tesla Inc (NASDAQ:TSLA) just impressed in a big way with its first quarter delivery performance that shot past expectation, but is it enough to sway those who are apprehensive from the sidelines or those who are bearish with concerns laced down the road? Though NVIDIA Corporation (NASDAQ:NVDA) saw an exciting year with its gaming segment, is the chip giant’s success about to hit a dip? Analysts across the Street are chiming in, with Cowen, Baird, and Pacific Crest all juxtaposed in their takes on Tesla, from the bearish to the bullish. Meanwhile, another analyst sees fit to step down from the sidelines on NVDIA, suddenly unfavorable as he readies for an abatement in sales. Let’s take a closer look:

Tesla: Overvalued or Gearing Up to Hit New Highs?

Tesla came in like a lion with its deliveries this quarter, outclassing expectation with 25,000 vehicles, sending shares on a 7% rise Monday. Nonetheless, analysts are at odds whether to back the electric car giant’s success or keep heedful eyes open toward long-term waning demand challenges.

From the standpoint of Cowen analyst Jeff Osborne, investors should steer clear of taking the Tesla gamble. Even though CEO Elon Musk’s brainchild at last came through on its delivery targets, escalating to record trading prices, the analyst stands by his bearish perspective, flashing a red light on Tesla once again.

“We continue to see shares as overvalued,” says Osborne, who believes the electric car giant “remains a concept stock,” and nothing more.

As such, the analyst reiterates a Sell rating on shares of TSLA with a $155 price target, which implies a just under 49% downside from where the stock is currently trading. By 2020, the analyst projects EPS to circle $6.03.

Osborne notes, “We are updating numbers for 1Q17 to reflect the delivery numbers announced, but maintaining our estimate of 24,500 vehicles in 2Q17, which puts us at the high end of prior guidance of 47-50k vehicles in 1H17. Our thesis remains intact that there are still more questions than answers heading into the Gigafactory 1 production and the Model 3 ramp. We note it has been frustrating to see the stock work whether it has missed or beaten delivery numbers over the last few quarters. Tesla has traded as a concept stock, that in our view has not reflected the fundamental estimates. As costs continue to mount, cash needs become acute, competitive threats become real, and consensus expectations look very aggressive, in particular for 2018, we expect investors to question the story/concept in greater detail.”

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Jeff Osborne is ranked #4,458 out of 4,557 analysts. Osborne has a 38% success rate and faces a loss of 17.7% in his annual returns. When recommending TSLA, Osborne forfeits 34.7% in average profits on the stock.

Conversely, Baird analyst Ben Kallo takes a sharply opposite take, choosing to instead shine bullish light on Tesla. Believing that not only were deliveries aligned with his expectations, but the giant’s future gleams with promise, Kallo puts forth a forecast that “shares will move higher.”

“TSLA announced it delivered just over 25k vehicles in Q1, in line with our estimate of 24,980. Importantly, TSLA is on track to meet and/or exceed 1H:17 guidance and we expect shares to trade higher as continued execution allows investors to focus on the Model 3. We continue to believe shares will make new highs in 2017 with progress towards Model 3 production and the gigafactory production ramp,” Kallo underscores.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Ben Kallo is ranked #1,182 out of 4,557 analysts. Kallo has a 49% success rate and realizes 4.6% in his yearly returns. When recommending TSLA, Kallo yields 32.6% in average profits on the stock.

Pacific Crest analyst Brad Erickson weighs in wary from the sidelines, slanting towards a long-term pessimistic perspective, as he anticipates demand for the Model S/X is starting to reach a capping limit. Though the Model 3 has revved up some excitement around shares in the short-term, the analyst remains cautious as he fears profits down the road will stumble on an increasingly sluggish trajectory.

Therefore, the analyst reiterates a Sector Weight on shares of TSLA without suggesting a price target.

“Tesla reported slight Q1 delivery upside, lowering the Q2 bar somewhat, which should be positively received by investors. While the company’s report and disclosures reinforced our view that S/X demand is approaching a ceiling, the Model 3-induced momentum in the stock could continue in the near term. Our longer-term view on the name remains more negative given clear signs of slowing demand for half the company’s longer-term profit and likely M3 production execution challenges,’ Erickson concludes.

According to TipRanks, Brad Erickson is ranked #4,250 out of 4,557 analysts. Erickson has a 46% success rate and loses 8.4% in his annual returns. However, when recommending TSLA, Erickson earns 32.6% in average profits on the stock.

TipRanks analytics show TSLA as a Hold. Out of 14 analysts polled by TipRanks in the last 3 months, 4 are bullish on Tesla stock, 5 remain sidelined, and 5 are bearish on the stock. With a loss potential of nearly 15%, the stock’s consensus target price stands at $258.92.

Revenue Reversal of Fate Gunning for NVIDIA

As NVDA braces to suffer a stark PC graphics revenue decline, thrown off by challenging comps and “desktop GPU market saturation,” Pacific Crest analyst Michael McConnell gets bearish on the chip giant, downgrading from Sector Weight to Underweight on NVDA without listing a price target. While some have argued the giant’s data center is its strong suit, the analyst worries a “possible pause” in revenue will soon hit coupled with weaker chip profits from Nintendos’s new video game console “Switch.”

Adding in a “lack of compelling virtual reality (VR) apps” into the mix of problems nipping at NVDA’s heels, the analyst has become pessimistic on the giant’s prospects.

“GPU orders to NVIDIA are unlikely to meaningfully resume until July given high channel inventory of three months […]” notes McConnell, who is critical that the demand created amid giant’s new GeForce GTX 1080 Ti launch was not substantial. Considering graphics card vendors have pointed to an uphill saturation battle when glancing at the “high-end gaming enthusiast market” which follows a “record sales year” for the chip giant’s gaming segment, the analyst fears NVDA has reached the end of its year-long momentum .

“While growth in NVIDIA’s Datacenter business have been nothing short of impressive over the past year, supply-chain conversations indicate declines in quoted Tesla GPU lead times over the past month, which have now declined to four to five weeks from seven to eight weeks in F4Q16. While we fully acknowledge that secular drivers remain intact in the company’s Datacenter business over the long term, we also note that orders from cloud companies are notoriously lumpy and beset with digestion periods after quarters of outsized acceleration. In the case of NVIDIA, we believe that declining lead times for Tesla could be indicative of a possible sales pause in its Datacenter business segment by this summer,” McConnell surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Michael McConnell is ranked #632 out of 4,557 analysts. McConnell has a 68% success rate and gains 10.7% in his yearly returns. However, when recommending NVDA, McConnell loses 9.9% in average profits on the stock.

TipRanks analytics demonstrate NVDA as a Buy. Based on 25 analysts polled by TipRanks in the last 3 months, 13 rate a Buy on NVIDIA stock, 7 maintain a Hold, while 5 issue a Sell. The 12-month average price target stands at $116.20, marking a 15% upside from where the stock is currently trading.

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