Shares of Tesla (NASDAQ : TSLA) were trading 20 points higher Wednesday morning despite a downgrade from BofA’s John Murphy.
The analyst cites valuation for his “Neutral” to “Underperform” downgrade following the stock’s recent run. According to Murphy, who also reduced TSLA’s price target to $485 from $500, the electric carmaker faces several hurdles, including ongoing/future production challenges, a burnout pattern for new models, continued cash burn from low production/deliveries, elevated cost, and the prospect of new competition.
Murphy, who also updated his global volume forecasts for the entire auto industry, predicting a 24% drop in global production and an 11% drop in U.S. production, said that Tesla’s current valuation suggests the market isn’t fully appreciating the company’s near-term risks.
In addition, the analyst said he believes auto stocks will start to price in recovery in FY2021-22E, as companies prove themselves and survive the downturn/trough, and that the recovery will be “a tepid U-shaped (one) as economies are reopened (3Q:20+).”
Tesla shares were trading up by 2.30 percent at $702.49 at the time of publication Wednesday. The name is up 68.06 year-to-date and $171.81% year-over-year. The $127 billion market cap company trades in a 52-week range of $176.99 to $968.99. The consensus price target for TSLA is $466.