On Tuesday, Jefferies analyst Philippe Houchois cut his rating on Tesla Inc. (NASDAQ : TSLA) to “Hold” from “Buy” while substantially raising the name’s price target from $600 to $800.
Houchois wrote in a note to clients that the downgrade reflects not only the need for a clearer view on Tesla’s upcoming battery business model, but also the company’s lofty market valuation (currently $147.5B) that has sent Tesla shares up 138% (through Monday’s close) since December 1.
TSLA has soared 179% in the last 12 months, crushing comparable gains of the S&P 500 and Dow Jones.
“However convinced we are about the Tesla equity opportunity, we still need valuation to be grounded into some visibility on market size and potential profitability,” Houchois wrote. The analyst noted however, that his firm continues to see Tesla as one of the few EV manufacturers likely to grow earnings and profitability over the next 24 months.
Houchois also said his elevated TSLA price target reflects the company’s pursuing additional growth in storage, generation and selling batteries to third party OEMs. According to the analyst’s estimates, the stationary storage cell market could be worth between $90 billion and $235 billion by 2025 through 2030.
Shares of Tesla are down 17 points, or 2.18%, to $786.20 Tuesday as the broader market continues dumping on mounting coronavirus fears.