Tesla Bulls at Jefferies Say They Got It Wrong This Year

(Bloomberg) -- One of Tesla Inc.’s biggest fans among Wall Street brokers said the carmaker’s share price decline in 2019 has been “humbling,” slashing its price target by a quarter while still recommending investors buy the stock.

“We got it wrong so far this year, but remain convinced there is significant value,” Jefferies analysts Philippe Houchois and Himanshu Agarwal wrote in a note Friday, cutting their full-year gross profit estimates by 20%. Performance in coming quarters will remain volatile as the company’s manufacturing and model range expand, they said.

Tesla’s stock fell 1.3% in pre-market trading in New York, adding to a 3% decline a day prior as analysts at Goldman Sachs and RBC Capital Markets both raised alarm bells about the company’s sales outlook.

However, Jefferies says current negativity around demand and competition is “excessive,” given Tesla’s technology edge and tested path to profitability compared with legacy original equipment manufacturer peers.

The bank cut its price target to $300 a share from $400, compared with an average of $270.4 among analysts surveyed by Bloomberg. The shares are down 34% year-to-date, closing at $219.6 on Thursday.

Meanwhile, R.W. Baird, another broker with a buy rating on Tesla, on Friday raised its price target to $355 a share from $340, saying it expects the stock to react positively to quarterly delivery numbers in the first week of July given current low expectations.

The bears’ argument that Model 3 demand has softened is “unsubstantiated,” analyst Ben Kallo said.

--With assistance from Dana Hull.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, John Viljoen

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