When is Wall Street’s price target cut really bullish? After a stock split of course.
On Wednesday afternoon, Wedbush analyst Dan Ives changed his target
(ticker: TSLA) priced at $360 from $1,000. But because
The stock split three-to-one on Wednesday, the nominal cut actually an increase from $333.33, a third of the $1,000 price target before Ives split.
Ives cited improving vehicle production in China as one of the reasons for the target increase. Tesla, along with the rest of the auto industry, experienced production and supply chain issues related to Covid in the second quarter.
The US regulatory framework was another reason Ives is more optimistic. The US just passed the Inflation Reduction Act, which includes purchase tax credits for electric vehicles. Many Tesla models should qualify.
“This green tidal wave is a major trend that we expect to emerge across the industry over the next decade and represents the biggest transformation in the auto industry since the 1950s in our opinion,” Ives wrote in his report Wednesday.
Interestingly, Bloomberg, which aggregates analyst ratings and targets, has Ives’ target at $120 per share. The system appears to have updated all price targets by dividing them by three, including the revised Ives number.
It’s just one of those things. Analysts’ average price target for Tesla stock is around $288 per share, according to Bloomberg. That’s down from about $294 per share, or a pre-split number of about $884, but no one else seems to have materially adjusted their price target besides Ives. The average target will move a bit as all the split related turns in the system are resolved.
Other analysts will update their price targets even if they don’t change their split-adjusted earnings estimates or their fundamental views on Tesla stock. The reason is that analysts don’t like small changes.
Mizuho analyst Vijay Rakesh, for example, now has a $391.67 price target on Tesla stock. The target before the split was $1,175 per share. Analysts usually do not include cents in price targets because doing so implies a false precision. No one really tries to predict a stock price to a penny.
RBC analyst Joseph Spak is another example. Tesla’s new price target is $367 per share. On Wednesday, his target was $1,100 a share, or $366.67 adjusted for the split. Spak essentially raised its price target to $1 on a pre-split basis. The reason seems to be none other than rounding.
Spak, Rakesh and Ives all rate Tesla stock at Buy. Overall, 53% of analysts covering the stock rate buy. The average market valuation ratio for stocks in the
is about 58%.
Entering Thursday trading, Tesla’s stock was down about 16% so far this year, while the S&P 500 and
were reduced by 13% and 21%, respectively.
Tesla shares rose about 1.8% in premarket trading. Future in
added about 0.3%.
Write to Al Root at firstname.lastname@example.org