Analysts from Morgan Stanley and Needham are sharing their two cents on Tesla Inc (NASDAQ:TSLA) and NVIDIA Corporation (NASDAQ:NVDA). One analyst is positive on Tesla in terms of upside, but critical that the electric car giant’s production goals to meet 500K Model 3 vehicles by 2018 are considerably premature. Meanwhile, one of the best analysts on the Street is backing NVIDIA all the way on back of its forthcoming foray into the field of artificial intelligence, dismissing concerns regarding gaming revenue declines. Let’s take a closer look:
Tesla Won’t Reach 500K Goal Before 5 Years+ After 2018
Though Morgan Stanley analyst Adam Jonas believes CEO Elon Musk has overshot his goal to produce the $35,000 500k Model 3 vehicles annually by 2018, he nonetheless remains positive on the company’s demand long-term. As such, the analyst reiterates an Overweight rating on shares of TSLA with a $305 price target, which represents a 23% increase from where the stock is currently trading.
For 2020, the analyst has raised his total unit volume forecast from 350k to 390k units while anticipating an accelerated Model 3 ramp between 2018 and 2019. For 2018, the analyst now expects Tesla’s Model 3 to reach an additional 10k units for his projection of 90k as well as an added 15k units to his 2019 expectations to 165k units. For 2013, volume forecasts remain mostly the same. “We made this increase following the company’s reiteration of its on-track Model 3 launch and higher levels of spending planned this year which, if achieved, we see as modestly derisking the ramp over the next 24 to 36 months,” explains the analyst.
Taking under account TSLA guidance, the analyst has boosted his capex projection for the financial year of 2017 from $1.8 billion to $2.6 billion. Additionally, the analyst estimates for gross crash circling $1.1 billion by the close of 2017 to below $800 million by the close of 2018, adding, “These may be uncomfortably low levels that allow for very little execution risk or market risk for a company of this size and at this point in its growth.” Moreover, the analyst notes, “We do not expect the company to achieve 500k units of annual Model 3 volume before 2024, more than 5 years after the company’s target.”
“We continue to believe over 100% of the upside from the current price to our $305 target can be accounted for by the value of Tesla Mobility, an on-demand and highly automated transportation service we anticipate to be launched at low volume in 2018,” Jonas concludes, who also sees possibility for the electric car giant to bring another partner into the mix which could benefit “the long-term appreciation potential of the equity.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Adam Jonas is ranked #518 out of 4,514 analysts. Jonas has a 50% success rate and realizes 10.0% in his yearly returns. When recommending TSLA, Jonas yields 28.7% in average profits on the stock.
TipRanks analytics demonstrate TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 6 are bullish on Tesla stock, 5 remain sidelined, and 6 are bearish on the stock. With a loss potential of nearly 2%, the stock’s consensus target price stands at $242.80.
Buy NVIDIA on Recent Weakness
Top analyst Rajvindra Gill at Needham is chiming in with a confident take on NVIDIA following the chip giant’s revealed alliance with Microsoft Corporation (NASDAQ:MSFT) regarding a fresh hyperscale conception for cloud-based artificial intelligence computing. Praising the giant for “leading the AI revolution” and deeming apprehensions surrounding gaming largely exaggerated, the analyst reiterates a Buy rating on NVDA with a price target of $120, which represents a just under 22% increase from where the shares last closed.
Gill elaborates, “The open source HGX-1 GPU accelerator was designed alongside Microsoft’s project Olympus for cloud-based AI workloads and seeks to become an industry standard due to its unique design. The design allows cloud service providers to offer customers numerous configurations, as the CPU can dynamically connect to any number of GPUs (ideal for start-ups using AI).” The advantage? “The HGX-1 performs deep learning tasks at 100x the speed of legacy CPU-based data centers and at a lower cost,” notes the analyst.
Overall, “We believe the current correction is overblown as we view ~11% Y/Y growth on a $4.5B business line significant. Gaming catalysts include: competitive gaming, VR/AR, more demanding blockbusters, and a positive upgrade cycle. Net we would be buyers on NVDA’s recent weakness as the company is leading machine learning/training in datacenters and positioned for significant future growth in the autonomous vehicle market,” Gill surmises.
Rajvindra Gill has a very good TipRanks score with a 63% success rate and a high ranking of #50 out of 4,514 analysts. Gill garners 16.7% in his annual returns. When recommending NVDA, Gill gains 9.9% in average profits on the stock.
TipRanks analytics exhibit NVDA as a Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 15 rate a Buy on NVIDIA stock, 9 maintain a Hold, while 4 issue a Sell. The 12-month average price target stands at $110.19, marking a nearly 12% upside from where the stock is currently trading.
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