Posted on April 11, 2017 by Matt Pressman
Yesterday kicked off another milestone for Tesla [NASDAQ: TSLA] as the stock surpassed GM to become the most valuable automaker (by market cap) in the U.S. According to Barron's, the rally started with "a bullish note from Piper Jaffray. Analyst Alexander Potter and his team boosted their rating on the car maker from Neutral to Overweight, and increasing their price target from $223 to $368. He writes that the call comes after driving a Tesla for seven months and meeting with the company last week." Potter says growth investors "can’t afford to ignore this stock."
Above: Tesla Model S (Instagram: tatjanaabigail)
The Piper Jaffray report explains that, "Tesla’s products have a captivating impact on consumers and shareholders alike; this advantage will be difficult to replicate. In the minds of its customers, employees, and shareholders, Tesla isn’t just another company. More so than any stock we’ve covered, Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies cannot replicate. As they scramble to catch up, we think Tesla’s competitors only make themselves appear more desperate. With this in mind, even if the Model 3 production launch goes badly, we think customers (and more importantly shareholders) will withhold judgment."
Above: Yesterday Tesla pulls ahead of GM in market cap (Image: Bloomberg)
What about those who remain bearish on the stock? Potter writes: "We sympathize with bears – but their (arguably rational) arguments probably won’t matter. In many ways, TSLA seems to play by its own rules... Tesla’s production timelines are unreasonably fast, at least based on 'expert' opinions in the automotive industry, and the company spurns various industry norms. For instance Tesla has avoided LiDAR in its self-driving systems (which some claim is dangerous), while pursuing a direct sales model that dealerships fiercely oppose. Yet, because of its superior products, loyal shareholders, and inspiring mission, TSLA remains unscathed."
Above: More Tesla Model 3 spy shots, including the one above, emerged this weekend and likely helped bolster confidence on Wall Street (Image: The Tesla Show)
Soon after Piper Jaffray's analyst report yesterday morning, Tesla stock surpassed GM to become the most valuable U.S. automaker. The Wall Street Journal wrote, "The Motor City has fallen to Silicon Valley... [this is] a feat that would have seemed highly improbable 13 years ago when the electric-car maker first began tinkering with the idea of making a sports car." WSJ reports that this "milestone underscores the seismic change occurring in the global automotive industry as Silicon Valley pursues a vision for transportation — including self-driving cars and vehicles-on-demand — that could upend century-old players."
Above: Tesla is upgraded by Piper Jaffray (Youtube: CNBC)
David Whiston, an analyst for Morningstar Research explained, "It's indicative of the market wanting to pay for potential, including into markets that don't exist yet in any large size such as EVs, home energy generation and storage, rather than profits and cash flow today that the large auto makers generate." Whiston concludes, "The market cares more about the potential new market value of the other businesses Tesla is in than about real profits and cash flow. Right now there is nothing to slow Tesla’s momentum. They could pass Honda, too.”