One of Wall Street's biggest Tesla bulls swings back at criticisms for its stance on the stock

Tesla may be one of Wall Street’s most divisive stocks. And equity analysts are all over the place when it comes to its future.

UBS, for instance, predicts the firm’s stock, which currently trades at $US324 could tumble as low as $US43 in a worse case scenario.

Equity analysts at Evercore, the New York-based investment bank, on the other hand, are bullish on the company’s stock and have a price target of $US330.

In a recent note sent out to clients on Wednesday, George Galliers and Chris McNally doubled down on their bullish stance on Tesla. In response to investor criticism, the duo defended and readjusted their stance on six points underpinning their price target. They are as follows:

  • “Light Volumes.” According to the note, the bank’s volume expectation of c370,000 units in 2018 and c490,000 units in 2020 is based on “volume contraction for Model S and Model X in aggregate between now and 2020” and they assume “only 20% growth for Model 3 in 2019 and 5% in 2020.”
  • “Autonomous leadership.” Some investors think the bank has underestimated Tesla’s ability to achieve Level 4 automation, an automobile that can drive autonomously in almost all cases, by 2020. The bank thinks Tesla’s ability to “deliver Level 4” is difficult to predict. And even if Tesla can deliver they will face numerous governmental hurdles.
  • “Optimistic margins.” Responding to criticisms on its margin assumptions, the bank emphasised that it believes Tesla “will continue to take cost out on the Model S and X in coming years.” The Model X, especially, will “push margins on both products towards c30%.”
  • “Liquidity.” Evercore maintains that Tesla will be able to self-fund thanks to a sufficient amount of liquidity.
  • “Valuation.” The bank readjusted the multiple they applied to earnings per share for its blended price target calculation and its discounted cash flow to address concerns about its valuation for Tesla.
  • “What matters for the stock.” If there is one thing Wall Streeters can agree on, it’s that the roll out of Tesla’s highly anticipated Model 3 is what matters the most for the stock. The bank’s Model 3 “delivery forecast” is 28,000 for 2017 and 280,000 in 2018.

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