Tesla may be the ‘original’ meme stock, but Barclays warns latest surge has been ‘too sharp’
According to a Barclays analyst, Tesla Inc. is “the original meme/momentum stock,” but he thinks the recent stock rally has become too detached from fundamentals.
“Our experience with TSLA has made us aware of the potential for TSLA’s stock movements to be driven not only by fundamentals,” Barclays’ Dan Levy wrote on Wednesday. Because of that momentum, he’s historically been “willing to be more generous with his stock multiple” but Tesla shares
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are up about 70% since their April bottom — a rise that Levy believes is “too strong” given the “challenging” near-term trends.
In his note to clients, he downgraded the stock from overweight to equal weight and increased his price target to $260 from $220.
Tesla has benefited from the surge of attention surrounding artificial intelligence, as the company’s fully self-driving (FSD) software leverages AI technology, and both Tesla’s management and some Wall Street analysts are optimistic about it the company’s potential to drive large sales of this product over the long term.
Read more: Tesla’s robotaxi future sparks more optimism for the stock
Additionally, Tesla sentiment has benefited from recent announcements with competitor General Motors Co.
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Ford Motor Co.
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and Rivian Automotive Inc.
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who have agreements in place to allow their drivers to use Tesla’s Supercharger network.
Also Read: Rivian Signs Tesla Fast Charging Deal, Joining Ford and GM
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“We agree that this momentum is positive, but believe it will take time for the benefits to materialize,” Levy wrote. In his view, “there are a majority of the realizable benefits.”
These recent sentiment drivers will tend to be long-lasting and do little to offset the headwinds we see in the near term.”
As for AI and Tesla’s FSD product, Levy said the company has “taken what is arguably the more challenging path to unlocking autonomous driving” by focusing on machine learning rather than LiDAR technology and “extensive mapping.”
“Notably, this approach lacks consensus and we anticipate that it will have a binary outcome that we believe will continue to be an opportunity to watch with long-term returns,” he said in his report.
Regarding Supercharger, Levy said there is “significant uncertainty among investors as to exactly what this development means” as he believes the deals represent a marketing rather than a financial boost at this point.
Read: Here’s why Tesla’s latest EV charging offering is more problematic for EVgo than ChargePoint
Tesla has approximately 18,000 Superchargers in the US and Canada and over 45,000 worldwide. “As Ford/GM customers gain access to just over 12,000 TSLA superchargers in the US/Canada, we anticipate that access will be limited to underutilized locations,” he wrote. “These dynamics, alongside only a modest number of Ford/GM EVs on the road today (in the region of 300,000), likely indicate that the financial opportunity for TSLA in the near future is immaterial.”
Meanwhile, he said consensus earnings expectations for 2024 seem too high for Tesla, while the company may need to make further price cuts, especially given third-party data on Model 3 inventory.