Barclays wants its clients invested in Tesla Inc TSLA to jump ship in the near term and wait for recent excitement around artificial intelligence and the company's Supercharger network to fizzle out before getting back in the name for a longer-term ride.
The Tesla Analyst: Barclays analyst Dan Levy downgraded Tesla from Overweight rating to Equal-Weight rating and raised the price target from $220 to $260, weighing near-term headwinds against the company's long-term upside potential.
The Tesla Takeaways: Tesla shares are up nearly 50% over the last month. The move has been driven by increased enthusiasm surrounding AI, as well as an accelerated adoption of the company's charging network by other automakers, Levy said in a Wednesday note.
"While we aren’t surprised that the stock has participated in the rally, we believe it is prudent to move to the sidelines, and we downgrade our rating to Equal Weight from Overweight," the analyst said.
Another element of the near-term storm brewing in the stock is the company's upcoming second-quarter report, which could be plagued by further inventory build, he said, adding that this could raise questions about the company's recent price reductions.
Given the steep rally in shares, near-term fundamentals should be in focus for investors, but the analyst firm isn't losing sight of the longer-term opportunity.
"We continue to see TSLA as the long-term winner amongst OEMs in the race to an EV world," Levy said.
The Barclays analyst expects excitement surrounding a lower-cost vehicle and Tesla's push for mass scale could begin to swell toward the end of 2024, heading into 2025, which could drive shares higher.
The company already has a notable margin advantage over legacy OEMs, and it's the leader in software defined vehicles and manufacturing and supply dynamics, he said. Despite price cuts impacting margins near term, Levy said the move is likely to pay off down the road.
"TSLA is pursuing significant scale ... This necessitates TSLA’s recent price cuts in order to match demand to its growing supply. And while this presents pain for margins in the near term, the share gains captured are critical to building TSLA’s business for the long term."
Check This Out: Tesla Charges Ahead In Europe As May Registrations Surge Over 2000% While Ford Falters
TSLA Price Action: Tesla has a 52-week high of $314.66 and a 52-week low of $101.81.
Tesla shares were down 2.26% at $268.25 Wednesday morning, according to Benzinga Pro.
Photo: courtesy of Tesla.
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