Tesla (TSLA): Don’t Sleep on the Risks, Analyst Initiates a Hold Rating on the Stock


The market has divided itself into two camps. The bulls argue that the worst is behind Tesla (NASDAQ:TSLA) after the electric car giant maintained its guidance for profitability for the second half of this year. The bears argue that the market is too optimistic about Tesla’s recovery, which could take a long, long time. Canaccord analyst Jed Dorsheimer has found himself in the middle.

This morning, Dorsheimer initiated coverage on TSLA stock, with a Hold rating and a $336 price target.

Dorsheimer opined, “We believe Tesla is benefitting from multiple converging forces and positioned perfectly to capture first mover advantage in electric vehicle adoption. Specifically, as Moore’s Law drives computing power up and costs down, Tesla’s electric vehicles (EVs) naturally become more cost competitive and ultimately cheaper than internal combustion engine (ICE) vehicles. Secondly, as advancements in storage technology continue to follow a similar trajectory, Tesla vehicles can improve performance (range, speed, acceleration), making them more appealing to a wider population. Finally, and perhaps most importantly, Tesla’s decision to own the last mile of distribution avoids the natural conflict that ICE auto OEMs face when moving toward EVs in a traditional franchised dealership model.

However, “While we believe TSLA should be applauded for disrupting the auto industry in such a short period of time, we see several risks around the company’s financing, cash burn, and general maturity in the industry […] We would look to become more constructive on opportunistic pullbacks or catalysts that we feel would de-risk the shares such as shifts in corporate governance, consistent production levels, and a CEO who is not working 120 hours per week to hold things together,” the analyst concluded.

Wall Street believes Rusch is smart to play it safe when it comes to the Tesla’s prospects ahead, as TipRanks analytics reveal the stock as a Hold. Out of 23 analysts polled in the last 3 months, 9 are bullish on TSLA stock, 6 remain sidelined, and 8 are bearish on the stock. With a loss potential of nearly 15%, the stock’s consensus target price stands at $294.61.

 

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