Following a change in its lead auto industry analyst, JPMorgan Chase has significantly softened its previously bearish outlook on Tesla Motors.
The bank has assigned Rajat Gupta to cover the automotive sector, replacing Ryan Brinkman. Brinkman had long been one of Wall Street's most prominent Tesla skeptics. Upon taking over, Gupta raised JPMorgan's price target for Tesla to $475 and upgraded the stock's rating to the equivalent of a hold.
Brinkman had maintained a sell recommendation on Tesla since 2015 and had previously forecast the stock could plummet to $145 by year-end.
Gupta, who previously worked under Brinkman, praised the "unique advantages" of Tesla's vertically integrated model in a report issued Friday, stating these advantages are "somewhat underappreciated and not fully understood." It was reported earlier this week that Brinkman remains employed at JPMorgan.
Being bearish on Tesla has been a challenging position, given the significant disconnect between the company's fundamentals and its elevated stock price. Part of the support for its high valuation comes from a large and vocal base of retail investors. CEO Elon Musk has cultivated a devoted following with his futuristic visions for areas like humanoid robots and is known for his blunt criticism of analysts, even mocking them for asking "boring, bonehead questions" on earnings calls.
In one of his final reports on Tesla's first-quarter results, Brinkman wrote that the earnings and commentary from the call raised questions about the company's "seemingly voracious appetite for capital expenditures." He also warned that Musk's admission that millions of cars billed as eventually being capable of full self-driving actually lack sufficient hardware could expose the automaker to potential legal issues.
As of Thursday's close, Tesla's share price is down approximately 7% year-to-date, underperforming the S&P 500's 11% gain over the same period.
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