It was a bumpy ride, but 2018 is proving to be a great year for Tesla (TSLA) and its stock. While the electric car giant has faced a host of distractions, including its celebrity CEO embroilment in an SEC investigation (which resulted in him stepping down as chairman), investors seem to finally be more focused on important mattes that define the company: Production. While there is no doubting the company’s ability to produce high-quality vehicles, the company has only recently proved it is on its way to doing it at scale. Investors have responded, with the stock now trading new a 52-week high.
Subsequently, Baird analyst Ben Kallo reiterates an Outperform rating on Tesla stock, while lifting the price target to $465 (from $411). Kallo’s current target is now Wall Street’s highest, well above the mean. (To watch Kallo’s track record, click here)
While there was a time when investors said Tesla would never be profitable, Kallo believes “the narrative will continue to change…to ‘TSLA can be sustainably profitable.” The analyst continues, saying he believes “sentiment will continue to improve as the company proves it can be self-supportive.”
Kallo cites Tesla’s third-quarter report as a turning point. The automaker reported its best quarter yet, beating Wall Street expectations with its highest profit. Kallo does not “believe the strong Q3 results were a “flash in the pan” and think(s) TSLA could maintain profitability” in the quarters to come. He continues, saying that he believes “further execution will reinforce investor belief the company can be self-supportive, which should be a positive catalyst.”
Even with the positive take, Kallo “think(s) TSLA should return to capital markets in 2019 to strengthen the balance sheet.” The analyst “think(s) a capital raise would remove lingering liquidity concerns and could be prudent to strengthen the balance sheet and insulate against risks of a broader global slowdown.” He cites this as a way to appease bearish investors, as “TSLA’s ability to service debt requirements has been a focus for Bears,” indicating that doing so would turns bears to bulls.
The battle seems to be torn between the bulls and bears as TipRanks analytics demonstrate the electric car giant as a Hold. Based on 27 analysts polled in the last 3 months, 10 rate a Buy rating on Tesla stock, 7 issue Hold, while 10 recommend Sell. With a downside potential of nearly 10%, the stock’s consensus target price stands at $338.46. (See Tesla’s price targets and analyst ratings on TipRanks)