Tesla stock picked up a new bearish rating, and it had an impact in morning trading.
Tesla shares dropped more than 3% in morning trading.
Thursday, according to ratings-aggregation services, HSBC launched coverage of Tesla stock (ticker: TSLA) with the equivalent of a Sell rating and $146 price target, down about 34% from recent levels.
Barron’s doesn’t have the report. HSBC didn’t immediately respond to a request for a copy of its report.
The issue appears to be valuation. The analyst believes the electric-vehicle business isn’t worth what Tesla stock trades at today. What’s more, Tesla’s other businesses, including energy storage, self-driving cars, robots, and artificial-intelligence computing, all have regulatory hurdles that mean slower-than-expected growth in the future.
Tesla stock is worth some $700 billion at current prices. At HSBC’s target price of $146 a share, the company’s market capitalization would be worth closer to $470 billion.
Coming into Thursday trading, Tesla stock is down about 8% over the past three months. Investors are worried about slowing demand for EVs. Global battery-EV sales rose roughly 25% year over year in the third quarter, but that is a slower rate than earlier in the year. Also, there are simply more EVs for sale now, all vying for market share.
Overall, about 43% of analysts covering Tesla rate shares at Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
A new Sell rating doesn’t change the Buy-rating ratio, of course, but it changes the Sell-rating ratio. About 15% of analysts covering Tesla rate shares at Sell. The average Sell-rating ratio for S&P 500 stock is close to 5%. Analysts typically shy away from Sell ratings, and prefer assigning Hold ratings to stocks they don’t favor.
The average analyst price target for Tesla stock is about $239. Among the Buy-rated analysts, the average target price is roughly $290. Among Sell-rated analysts, the average target price is about $120.