Wall Street on Thursday welcomed a new bear on Tesla Inc., with analysts at HSBC questioning the timing of the EV maker’s projects and saying that “charismatic” Chief Executive Elon Musk is both an asset and a risk.
The analysts, led by Michael Tyndall, rated Tesla’s stock
TSLA,
at the equivalent of sell and with a price target of $146, which represents a downside of more than 30% over Thursday prices.
The caution “stems from the uncertainty around the timing and
commercialization of [Tesla’s] varied ideas,” the HSBC analysts said. “We see considerable potential in Tesla’s prospects and ideas, but we think the timeline is likely to be longer than the market and valuation” reflect.
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Still, Tesla is “more than just an auto company,” they said. EVs may be the main driver of revenue and profits at the moment, but taking the company at its word, “the future for Tesla is about robots, autonomous vehicles, energy storage and supercomputers.”
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Many of these ideas, however, are in the concept stage, the analysts said. It seems clear that “there is a fair degree of hope in the current share price.”
As for Musk, they said, having a “charismatic and convincing” CEO supports the that hope element on Tesla’s valuation. His global fame has afforded the company a customer awareness that far outweighs money spent in marketing an advertising, which they called a “tangible” benefit.
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But Musk’s “prominence presents a considerable ‘singleman’ risk,” the analysts said.
The analysts worked with the assumption that Full Self Driving, Tesla’s suite of advanced driver-assistance systems for urban driving; the Dojo supercomputer; and the Optimus robot “all become successful by the end of the decade.”
“We think, however, that the expected cost of capital for these businesses
should be well above [Tesla’s] average given the regulatory and technological challenges they face,” the analysts said.
The sell rating at HSBC arrives as bulls outnumber bears among Tesla analysts. Of the 46 analysts polled by FactSet, 20 have a buy or equivalent rating on Tesla’s stock and 19 have a hold or equivalent rating. Only seven have a sell or equivalent rating.
The stock has held on to sizeable gains so far this year, up 76%. That compares with an advance of about 14% for the S&P 500
SPX.
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