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Tesla bull and JMP Securities analyst Joseph Osha downgraded Tesla stock to Hold Tuesday. Tesla’s stock price run, for this bull, has gone far enough.
Osha deserves some credit, however, for keeping up with Tesla stock’s (ticker: TSLA) epic run. He was an early $1,000-plus price target setter for Tesla shares—going to four digits in March when Tesla shares were below $800. In July, he raised his price target to $1,500 a share when Tesla stock was below $1,400. Instead of raising the price target again ahead of Tesla second-quarter earnings—due Wednesday after the market closes for trading—he downgraded the stock.
“We continue to believe that [Tesla] can become a $100 billion [in sales] car company by 2025, but we cannot arrive at a reasonable basis for arguing that the stock should be valued above current levels, even considering our fundamental outlook,” wrote Osha in a Tuesday research report.
Tesla is expected to do north of $40 billion in sales in 2021. To reach $100 billion in sales from there implies about 25% average annual growth for the subsequent four years. Tesla sales grew about 50% a year on average from 2014 to 2019.
This year’s sales have been affected, like every other car maker, by the coronavirus pandemic. Tesla sales are expected to grow about 11% in 2020, from $24.6 billion in 2019.
Sales growth in a pandemic is impressive, and there is more good news coming, including profit margin expansion and more manufacturing capacity, according to Osha. But he says that news is already reflected in the stock price.
With the downgrade, only eight out of 36 analysts rate shares the equivalent of Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 55%. What’s more, 15 out of 36 rate shares Sell. The average Sell-rating ratio for Dow stocks is just 7%. Wall Street is more likely to slap a Hold rating on stocks they don’t recommend than a Sell rating.
Wall Street continues to struggle with Tesla valuation.
Investors struggle less. Shares have skyrocketed almost 540% over the past year, crushing comparable returns of the S&P 500 and Dow Jones Industrial Average, as well as automotive peers, over the same span.
Tesla’s 52-week range is, roughly $200 to $1,800 a share—it’s been a remarkable year for the electric vehicle pioneer.
Tesla stock isn’t reacting to the downgrade. Shares are up another 1% in early trading after rising 9.5% Monday.
Write to Al Root at allen.root@dowjones.com