Tesla Motors may be losing money on production costs and grappling to generate profit, but market analysts believe that the brand’s devoted follower base should help to increase its shares for now.
There were no massive stock ratings of price target changes on the automaker after it posted a worse-than-expected quarterly declines late Wednesday. Tesla CEO Elon Musk’s mind-boggling optimism and assertions that Tesla is not a money-losing enterprise, despite data showing that it lost $293 million in the previous quarter – which appeared to keep the critics at bay.
“It’s hard to recommend a cash-burning company with such an uncertain outlook,” said an analyst, who echoed a neutral rating and $223 price target on the stock.
He also added that customers and investors still seem attracted by Tesla’s offerings. Market experts believe that as long as the automaker keeps this tone, its stock multiple will is likely to remain buoyant.
According to a market analyst listed a few challenges that Tesla still needs to discuss in a note to clients on Thursday morning.
Shares of Tesla climbed 0.3 percent to $226.53 in Thursday’s morning trade. The stock has increased 1.5 percent in the last three months, but remains down by over 15 percent in the past 12 months. Meanwhile, the S&P 500 index rose 5.5 percent in three months and 3.5 percent over the past year.
A wide spread of price targets on the stock indicates the huge discrepancy several analysts have in regards to the company’s near-term outlook. The average rating on Tesla’s stock is a hold, according to a survey. The consensus price target of $238.33 suggests a 5 percent hike from Wednesday’s $225.79 closing price.
Some critics maintained high expectation, while others are reducing estimates in acceptance of Tesla’s profitability issues. Analysts with lower targets tend to have more realistic expectations of the company’s near-term growth prospects.
Analysts slightly cut near-term estimates for the bigger total of vehicles predicted to be sold through direct leasing programs, and lowered fiscal 2016 loss-per-share estimate to 32 cents from earlier forecasts of a $1.60 earnings per share.
The discounted forecast mirrors “the degree of consistent ratcheting down of near-term earnings expectations for not only J.P. Morgan but consensus as well.”
Tesla and SolarCity Deal
Tesla’s proposed $2.6 billion takeover of SolarCity has been the most criticized deal of 2016. Corporate governance analysts are in an uproar, as Tesla CEO Elon Musk, is the largest shareholder of both companies.
Critics said that the transaction is an obvious self-dealing and accused Musk of utilizing valuable Tesla shares to bail out a struggling SolarCity.
Several auto industry experts also said that the idea of merging both companies makes no strategic sense. SolarCity’s weak financial performance added to investors’ concerns, as well as the fact that Tesla has a lot of rivals in its car business this year.
The deal is expected to double Tesla’s workforce to almost 30,000 employees and establish a combination of solar, power storage and transportation – which the automaker claims to be the world’s sole integrated sustainable energy firm.
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