Does anyone have access to the Merrill report? If so please let us know what is says, a link would be much appreciated
Finally, I can at least add some value to this thread. Summary is that the stock is overvalued currently and has a price target of $45. Here are some relevant parts to the report:
Stock Data
Price US$171.54
Price Objective US$45.00
Date Established 8-Aug-2013
Investment Opinion C-3-9
Volatility Risk HIGH
BofAML Ticker / Exchange TSLA / NAS
Bloomberg / Reuters TSLA US / TSLA.O
Investors appear increasingly spooked in October
We have written extensively on our view that Tesla’s shares are vastly overvalued
from a fundamental standpoint in reports such as 300K reasons to have doubt and
Caution: Oversize Load implied in current share price. We have also expressed
concern that retail investors could ultimately be at risk, as institutional ownership of
Tesla shares continues to wane (see Mom, Pop, & the Gen 3 dream). Thus far we
have largely been howling at the moon, but believe it is worth considering what
could occur when sentiment behind a momentum driven stock shifts. This appears
to be slowly occurring, driven by factors such as the recent Model S battery fire and
potential NHTSA probe, and speculation of a slowdown in the company’s European
expansion. In fact, TSLA shares are down roughly 12% from their 9/30 closing price
of just over $193/sh. While the recent decline pales in comparison to the year-todate
hyperbolic growth of the shares, it could foreshadow emerging cracks in the
seemingly ironclad façade surrounding Tesla’s stock.
Will 3Q earnings bring tricks or treats?
A degree of investor caution may be particularly relevant as we approach 3Q
reporting, given what appears to be a very wide range of expectations for Model S
deliveries. As a point of reference, Tesla’s outlook is for slightly over 5K units, our
estimate calls for 5.5K, while some analysts expect 7K+. There is also likely to be a
fair amount of confusion in the numbers, given that some analyst estimates seem to
incorporate lease accounting (thus depressing EPS expectations), regulatory credits
remain a wild card, and the company no longer provides an order backlog. One
thing remains relatively certain, in our view – volatility will persist.
An industry innovator, but stock is overvalued
Despite our view that Tesla is an important innovator in the electric vehicle market,
with solid technology and a reputable brand, we continue to believe meaningful
execution challenges remain and the shares are overvalued. Furthermore, we believe
Model S demand could cool off once early adopters receive vehicles and expect the
ultimate addressable market for luxury, electric vehicles to be smaller than many
expect. Despite TSLA’s technology and the beginnings of a charging station network,
we believe the average consumer remains unlikely to sacrifice convenience in order to
own an electric vehicle. Therefore moving into the mass market (key to the bull thesis)
could prove extremely difficult, and will also be met by similar EV offerings from many
incumbent OEMs with deep pockets and the ability to compete on pricing. As a result,
we maintain our Underperform rating and $45 price objective, based on a 2015e
EV/EBITDA multiple of approximately 12X.
