The bull is a little more bullish after the passage of the Inflation Reduction Act, which includes a $7,500 purchase tax credit for many electric vehicles.
On Sunday, CFRA analyst Garrett Nelson got his
(tick: TSLA) price target up $120, or about 11%, to $1,245 a share from $1,125.
“Signing the Deflation Act was the equivalent of Christmas in August for Elon Musk & Co.,” Nelson wrote in his research briefing. He is calling
the biggest winner from the new law, since the company sells the industry’s two most popular electric vehicles—the Model 3 and the Model Y. It expects most 3 and Y trims to qualify for the $7,500 sales tax credit.
Previously, Tesla buyers did not qualify for any credit because Tesla had reached its manufacturer cap of 200,000 units. The cap was a feature of the old law – no more credits were available when cumulative EV sales reached that level.
“The new law significantly eases concerns about EV competition, as approximately 70% of the 72 EV models currently sold in the US suddenly became ineligible for the tax credit under the new law,” added Nelson. Electric vehicles must be manufactured in North America to qualify for the new credit. This will exclude certain EV models from, say,
(000270.Korea) assembled in South Korea.
Nelson’s target is based on 60 times 2024 earnings per share. He expects Tesla to earn about $20.75 per share in 2024, down from a previous estimate of $18.75. The Wall Street consensus for 2024 is about $20.20 per share.
With an average analyst price target of $884 per share, Wall Street appears to believe Tesla is worth about 44 times estimated 2024 earnings.
they trade for about 16 and 20 times estimated 2024 earnings, respectively.
The $884 target is also right for where Tesla stock is trading. That’s not much of a surprise, as Wall Street appears divided on the stock. Just over half of analysts covering Tesla rate Share Buy. The other half say “don’t buy.” The average market rating ratio for S&P stocks is about 58%, a few percentage points higher than Tesla. The average analyst price target implies gains of about 13% for a stock on the S&P.
Tesla’s “don’t buy” ratings are roughly split between Hold and Sell ratings. Tesla has a high sell rating ratio for a major stock with just under a quarter of analysts giving the stock the most negative rating. The average sell rating ratio for a stock in the S&P is less than 10%.
The Buy-Sell rating difference between Tesla and typical S&P stocks is one reason Tesla tends to be more volatile than other stocks. Tesla tends to go up or down about twice as fast as the overall S&P 500.
Shares are down about 1.9% in premarket trading on Monday. S&P 500 futures are down about 1.2. This ratio is only 1.6 times. The two times number is just a rule of thumb and anything can happen in a trading day.
Heading into Monday’s trading, Tesla stock is down about 16%, while the S&P and Nasdaq are down about 11% and 19%, respectively.