Market Overview

Tesla's Stock Continues Fall After JPMorgan Cuts Target To $195

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Tesla's Stock Continues Fall After JPMorgan Cuts Target To $195

Tesla Inc (NASDAQ: TSLA) CEO Elon Musk made his intentions clear he wants to take his company private at $420 per share. JPMorgan analysts cast some doubt on the latest developments, which reinforces a bearish stance on the stock.

The Analyst

JPMorgan analysts led by Ryan Brinkman maintain an Underweight rating on Tesla's stock with a Dec. 2018 price target lowered from $308 to $195.

The Thesis

Musk's Aug. 7 Tweet gave the impression an entity had "firmly decided" to fund a transaction to take Tesla private and the board was at the very least informally supportive of a deal, Brinkman said in a note. However, the CEO's follow-up comments on Aug. 13 implies any deal is in reality "potentially far from being formally proposed."

Given the inconsistency in comments from Tesla, JPMorgan said it's appropriate to take a different approach in valuing the stock and remove a 50 percent weighting that was previously assigned to a going private transaction at $420 per share. The firm's revised $195 price target is based on a pure fundamental basis, which factors in a blend of P/E, EV/EBITDA, and Price-to-Sales multiples.

The price target could move up or down based on new developments which impact the likelihood of a transaction occurring or not, the analysts said.

Price Action

Shares of Tesla fell as much as 7 percent in Monday's pre-market session. At time of publication, the stock was down about 2.6 percent at $297.63 per share.

Related Links:

Tesla CEO Elon Musk: 'From A Personal Pain Standpoint, The Worst Is Yet To Come'

These Analysts Love Tesla's Potential, But Balk At Its Valuation

Latest Ratings for TSLA

DateFirmActionFromTo
May 2020WedbushMaintainsNeutral
May 2020JMP SecuritiesMaintainsMarket Outperform
May 2020Morgan StanleyMaintainsEqual-Weight

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