Tesla Price Target Nearly Triples At BofA, But Firm Maintains Underperform Rating

In a report published Thursday, Bank of America Merrill Lynch analyst John Murphy reiterates an Underperform rating on Tesla Motors Inc (NASDAQ: TSLA), while raising the price target from $165 to $180."While we continue to view Tesla as an important catalyst for the auto industry and electric vehicle (EV) market specifically, we believe its shares remain overvalued. In our view, the company could be successful in the long term as niche focused company, as demand for alternative drivetrains accelerates," Murphy stated.In the near term, however, the analyst expects consumer and regulatory demand for automobile fuel efficiency to be primarily met through smaller, turbocharged, internal combustion engines, used on lighter vehicles."Therefore, we believe EVs are likely to remain more niche for the foreseeable future, while company-specific initiatives will continue to challenge earnings, cash flow, and returns in the near-term," the Bank of America report said.The analyst believes that there are several issues that the company is likely to face in the coming years, such as launch delays for Model X, a potential spike followed by burn-out of demand for Model S, challenges to the profitability of Model 3, whether Tesla Motors will be successful in China, potential need for a capital raise soon given the cash burn, among others.