This year will likely be the biggest year ever for Tesla (ticker: TSLA) and its shareholders as the company begins shipping its highly-anticipated Model 3. But there’s some sobering news from a Bernstein analyst.
In a research note, analyst Toni Sacconaghi Jr., says Tesla’s stock, which is up more than 18 percent in the last 12 months, is already fully valued, when taking into account the risks the company faces.
On Wednesday, Bernstein initiated coverage of Tesla at “market perform” and set a price target of $250 for TSLA stock. Sacconaghi says there is too much risk involved with owning Tesla shares for investors to expect much upside in 2017.
[See: 10 Ways to Invest in Driverless Cars.]
“Historically, the stock has moved on vehicle deliveries versus expectations and profitability, and we believe that is unlikely to break out of its three-year trading range until investors see evidence of profitability on the Model 3,” Sacconaghi says.
Profitability has been somewhat of a sore spot for Tesla as the company ramps up for mass production of the Model 3. In 2016, Tesla reported a net loss of $773 million. However, Tesla bulls are more interested the huge 73 percent jump in revenue.
Sacconaghi sees plenty of things to like about Tesla, just not enough to recommend buying TSLA stock. He says Tesla is the industry leader in battery technology costs, is the gold standard in brand strength and consumer awareness and has cost-efficient vertical integration advantages over peers.
Unfortunately, there are reasons for concern as well. Although Bernstein is bullish on Tesla in the long term, 2017 could be a bumpy road. Sacconaghi says Tesla’s Model 3 rollout will be critical to the future of the company.
[See: Car Companies and the Race to Profits.]
“A poor ramp and customer experience on Model 3 could not only impact Tesla’s near-term financials,” he says, “but undermine the franchise longer term.”
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TSLA Stock: Bernstein Sees Little Upside for Tesla originally appeared on usnews.com
