Between a stellar first quarter delivery performance from Tesla Inc (NASDAQ:TSLA) for 2017, surpassing expectation, and bustling signs of trouble brewing between Alphabet Inc (NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN), who is about to unleash a real advertising ace, analysts are weighing in from across the Street. While Guggenheim lifts the price target on Tesla on back of compelling vehicle delivery strength, BMO Capital moves the price target dial in converse directions for Alphabet and Amazon, seeing AMZN as a force to be reckoned with for GOOGL. Let’s explore:
Tesla Shows Up Strong for Q1 Deliveries, But Still ‘All About the Model 3’
Guggenheim analyst Rob Cihra continues to vote most of his confidence on Tesla’s Model 3, but has become even more bullish on the electric car giant after a robust first quarter showing with a vehicle delivery beat. In reaction, the analyst reiterates a Buy rating while boosting the price target from $300 to $320, which implies a just under 6% upside from where the stock is currently trading.
For the first quarter of 2017, TSLA has indicated deliveries exceeding 25k, which not only marks a 69% year-over-year rise, but races ahead of the analyst’s expectations calling for 24k in deliveries. Moreover, the giant is “in line/tracking” in an even further competitive position than its original outlook calling for a delivery of 47 to 50k units by the first half of this year, which would denote a 61 to 71% year-over-year climb. Additionally, TSLA saw its sales mix split between 54% for its Model S sedan and 46% for its Model X SUV, which aligns with the analyst’s estimate, with quarterly production totaling 25.4k, showcasing a 64% year-over-year increase.
Ultimately, “We believe that an investment in Tesla is still ‘all about the Model 3,’ targeted to launch in July and start volume production in Sept, but sustaining growth in its existing premium models clearly remains important as well. Updates to our estimates include higher interest expense and small dilution from Tesla’s recent capital raise, but we also take the opportunity to revert our EPS modeling back to more conservatively exclude the non-controlling interest boost from SolarCity funds, which we consider non-operational with limited forecasting value. Doing so meaningfully drops 2017E EPS back to ($5.80) from ($0.21) but with no impact on cash flow and minimal impact on our 2019E EPS which we continue to estimate approaching $13 and the most meaningful metric as Model 3 ramps to high volume/ leverage. […] we believe TSLA’s multiple can continue to improve as we move closer to Model 3 reality,” Cihra contends.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Rob Cihra is ranked #765 out of 4,557 analysts. Cihra has a 58% success rate and garners 10.8% in his annual returns. When recommending TSLA, Cihra gains 24.1% in average profits on the stock.
TipRanks analytics exhibit 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 15%, the stock’s consensus target price stands at $257.25.
Alphabet vs. Amazon: Watch Out Alphabet
BMO Capital analyst Daniel Salmon delivers a word to the wise to Alphabet investors: Be wary of Amazon’s dive into advertising, as it means trouble for Alphabet. Seeing a glaring “headwind” in the distance from Amazon gunning for Alphabet, the analyst downgrades from an Outperform to a Market Perform rating on GOOGL while reducing the price target from $1,005 to $880, which represents a 3% increase from where the shares last closed.
However, when sizing up the Amazon side of the coin, a new leap into advertising shows great promise for the online auction and e-commerce leader. As such, the analyst reiterates an Outperform rating on AMZN while kicking up the price target from $900 to $1,200, which represents a close to 33% increase from current levels.
Advertising for Amazon “could be worth about $150 billion, or $300 per share,” predicts the analyst, calculated from a free cash flow projection from now to 2024.
The analyst has reigned in forecasts for the year for Alphabet, taking revenue to $107.83 billion and EPS in net income to $33.28, a step below prior projections looking for $108.35 billion in revenue and $33.60 in EPS. Furthermore, 2018 estimates also bore the brunt of a downward slash.
Meanwhile, Amazon’s revenue, likely hitting $2.12 billion in 2016, could escalate to $3.51 billion by the end of the year, reaping $5.7 billion by the next. Appraising free cash flow to have reached $1.07 billion for last year, the analyst anticipates a surge to $1.6 billion in 2017.
WPP CEO Martin Sorrell, who directs the biggest advertising company in the world, is taking note, with his firm opening a Seattle agency just to center on Amazon, a true sign of the company’s budding advertising momentum. “WPP spends billions of dollars a year on behalf of clients across properties such as Google (WPP spent ~$4.9B in 2016) and Facebook (WPP spent ~$1.7B in 2016) and we believe their decision to open an agency is telling,” asserts Salmon, who notes, “We have also spoken with executives at other major holding companies that have indicated a recent uptick of discussions and activities with Amazon.”
“Amazon’s competitive advantage in advertising centers on the massive amount of consumer purchase data it possesses. For over 20 years, Amazon has gathered a large repository of data on consumer purchasing habits, and we believe this is what differentiates it from the advertising offerings of other […] While Google knows what people are searching for […], Amazon knows the specific products that customers are purchasing and how frequently they are purchasing these products,” explains the analyst.
Especially when considering huge data firm BloomReach has found domestic consumers starting product searches on Amazon has jumped from 44% to 55% last year, the analyst believes this upward trend is one of many for the vast prospects lying in store for Amazon Sponsored Products, converting searches to dollars at an enticing pace.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst Daniel Salmon is ranked #461 out of 4,557 analysts. Salmon has a 76% success rate and earns 7.4% in his yearly returns. When recommending GOOGL, Salmon realizes 10.3% in average profits on the stock. When suggesting AMZN, Salmon yields 19.5% in average profits on the stock.
TipRanks analytics show GOOGL as a Strong Buy. Based on 33 analysts polled by TipRanks in the last 3 months, 28 rate a Buy on Alphabet stock, 4 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $989.83, marking a 16% upside from where the stock is currently trading.