Tesla Inc (NASDAQ:TSLA) and Facebook Inc (NASDAQ:FB) are keeping up with the Joneses, between Tesla’s buzzed about upcoming entry into the trucking market and Facebook’s skating tracks into the Augmented Reality rink. The Barclays and Aegis teams explore what the opening of these new windows of opportunity might mean for two of Wall Street’s most captivating giants, but from converse perspectives. Let’s take a closer look:
Tesla electric semis are storming onto the scene come September, and even though CEO Elon Musk is hyping them up to be “seriously next level,” Barclays analysts Brian Johnson and Robert Wertheimer weigh in from a generally negative perspective on the machinery industry.
Therefore, the firm rates TSLA a Sell with a $165 price target, which represents a just under 47% downside from where the stock is currently trading.
The analysts explain, “Exactly what that product may be is unclear, though the term commonly refers to heavy trucks carrying freight. We obviously cannot analyze an unknown product, and success in SpaceX and Tesla cars are very impressive.”
From the analysts’ eyes, “Dealers are the core, underappreciated asset in machinery,” but how does this translate for the electric car giant? Well, “Tesla’s no dealer model is very workable in a more industrial application, and its service thus far seems quite good for a new entrant in auto. But, local points of service are a must, and they are hard to get,” the analysts believe.
Additionally, the analysts pinpoint that regarding the dealer aspect of the equation, “With ‘dealers’ internal to Tesla rather than independent, some of that complexity is removed and some margin retained, but the underlying economics are unchanged. Lower OE margins and higher parts margins take time.”
Considering the competition between electric motors vs. hydrogen to be the chosen fuel by vehicles, the analysts still believe it “sounds pretty far out for a truck buyer” even if consumers are expressing intrigue in hydrogen as a viable option. Meanwhile, should the price for diesel expenses climb, a predicament the Barclays team views as probable, “then electric will look better.”
Ultimately, for Barclays, “As it stands though the semitruck phrasing is a bit of an internal head scratcher.”
According to TipRanks, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, analysts Robert Wertheimer and Brian Johnson have a yearly average return of -2.6% and 2.5%, respectively. Wertheimer has a success rate of 42% and is ranked #3,748 out of 4,557 analysts while Johnson has a success rate of 55% and is ranked #1,607 out of 4,557 analysts.
TipRanks analytics demonstrate TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 6 remain sidelined, and 6 are bearish on the stock. With a loss potential of 10%, the stock’s consensus target price stands at $274.55.
Facebook’s Big AR Splash
On the heels of the Facebook F8 Developer conference, which Aegis analyst Victor Anthony commends as a “positive for the business and for the stock,” the analyst is out with a bullish note, underscoring key takeaways from the conference.
As such, the analyst reiterates a Buy rating on FB with a price target of $160, which represents an 11% increase from where the shares last closed.
When looking at an exciting augmented reality-focused second half act of the social media titan’s winning approach, the analyst praises Mark Zuckerberg’s constant endeavors “to continue to grow and make the platform more relevant for users.” With FB taking on the camera as “the first augmented reality platform,” Anthony believes, “The augmented reality focus puts them in the path of Snap […] who is also making AR a focus and made its own announcement on AR yesterday. But given Facebook’s scale, we see them as more of the trendsetter on AR going forward.”
Moreover, “Facebook believes that the shift to video will be as big or bigger than the shift from desktop to mobile. Today, video constitutes 50% of mobile video traffic and that number should grow to 75% in five years, according to Facebook, citing a major consulting firm. As a consequence, Facebook is putting video at the center of all of their apps,” continues the analyst.
Lastly, “With audience network, Facebook places ads on sites outside of Facebook. From the testimonials, it appears that the ad break format is still finding its way, but holds longer-term promise. Facebook noted that pre-roll video ads do not work well in the newsfeed,” Anthony concludes, adding that Zuckerberg will be using the Facebook Journalism Project to also better efforts at detecting false news.
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, five-star analyst Victor Anthony is ranked #130 out of 4,557 analysts. Anthony has a 65% success rate and garners 12.3% in his annual returns. When recommending FB, Anthony gains 46.8% in average profits on the stock.
TipRanks analytics show FB as a Strong Buy. Based on 36 analysts polled by TipRanks in the last 3 months, 34 rate a Buy on Facebook stock while 2 maintain a Hold. The 12-month average price target stands at $163.84, marking a 14% upside from where the shares last closed.