If ever there was a battleground stock, Tesla (NASDAQ:TSLA) would have to be it. You’re either all-in on this stock, or you believe its eventual demise is right around the corner. Needham’s analyst Rajvindra Gill is certainly on the latter side.
Tesla shares are soaring nearly 10% in early trading Thursday after CEO Elon Musk disclosed, during the second-quarter earnings report, that the company could be “sustainably profitable” by the end of the year.
However, Gill remains bearish on the bigger picture, reiterating an Underperform rating (i.e., Sell) on TSLA stock.
Gill commented, “TSLA posted better-than-expected sales and reduced its free cash flow burn, which will likely drive the shares higher today. We believe that the improvement in margins is driven by favorable mix shift as it sells higher-ASP AWD, dual-motor models and generates a richer mix from Europe and APAC. We believe TSLA is rapidly exhausting its high-end backlog, as lead times are falling to 1-3 months. What we are concerned about is: what’s the true level of demand for the $35k base model as we exit the year, how does demand change once the $7,500 credit declines, what % of the 420k net reservations are for the $35k model and will cancellations accelerate? These questions and the astronomical valuation cause us to reiterate our stance.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rajvindra Gill has a yearly average return of 20.3% and a 67.2% success rate. Gill has a 6% average return when recommending TSLA, and is ranked #32 out of 4839 analysts.
Overall, Wall Street is pretty evenly split between the bulls and bears. Based on 23 analysts polled in the last 3 months, 10 rate a Buy on Tesla stock, 5 maintain a Hold, while 8 issue a Sell on the stock. The 12-month average price target stands at $310.17, marking just a slight upside from where the stock is currently trading.