Tesla Stock Is Due for a Cooling Off Period, Says Analyst

Tesla (TSLA) is adept at proving the doubters wrong, but going against recent performance, in its latest quarterly statement, the EV pioneer fell short of expectations.

While Tesla delivered a beat on the top-line with revenue increasing by 45.5% year-over-year to $10.74 billion and coming in ahead of the estimates by $280 million, it disappointed on the bottom-line. The company reported Q4 Non-GAAP EPS of $0.80, missing consensus estimates by $0.25.

RBC analyst Joseph Spak thinks the stock is due a cooling off period.

“Given the run in the name, an earnings ‘miss,’ no specific 2021 guidance and potential supply constraints, we could see the stock take a breather,” the analyst said. “But, to long-term believers, there is likely little to deter their thinking.”

Despite the miss, Tesla managed a net profit of $270 million in Q4, and the year’s record sales resulted in 2020’s net income hitting $721 million, a massive improvement on the net loss of $862 million reported a year earlier.

The company also made bullish noises about the future; Tesla anticipates annual sales growth of 50% “over a ‘multi-year’ horizon” and even expects to better the target in 2021.

That said, the company is facing battery supply issues, which CEO Elon Musk cited as the reason why the Tesla Semi hasn’t entered production. Spak believes the issue “can limit near-to-mid-term growth.”

“The supply constraint can make growth choppy and perhaps bring down some near-term expectations,” Spak noted. “Elon reiterated that while Tesla is doing their own cell production to accelerate growth, they are very dependent on and want to increase purchases from cell suppliers (CATL, Panasonic, LG) and want them to increase production.”

Nevertheless, following the earnings call, Spak nudged his price target upwards from $700 to $725. However, the revised figure still represents downside of ~9%. As a result, Spak’s rating for TSLA remains a Sector Perform (i.e. Hold). (To watch Spak’s track record, click here)

Wall Street believes Spak is smart to play it safe when it comes to the electric giant’s prospects ahead. TSLA gets a Hold consensus rating based on 12 reviews, including 7 Buys, 15 Holds, and 3 Sells. Shares are trading for $793.53 and have an average price target of $639.55, suggesting ~19% downside from current levels. (See Tesla stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.