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Merrill Lynch Research Sucks Power out of Tesla and Elon Musk

I guess Bank Of America needs to cover their short position.

... or they are offering an honest assessment that Tesla stockholders don't like because it may have a negative impact on the current stock price. There is just as much motivation on the part of current stockholders to trash negative articles to protect their position.

This article makes a lot of sense. Read the threads about EU deliveries - Tesla is having problems and the article suggests that EU deliveries are not going as expected. Well, they're not. I didn't find anything unreasonable about this article that would make me believe that it's anything other than an honest look at the stock value compared to Tesla's business realities.

The fact that Tesla's stock gives it a market cap at just less than half of GM is ridiculous. Tesla is not worth half as much as GM - a company that moves millions of cars each year globally. It just isn't. The stock is a bubble.

Did anyone ever think the stock would stay up that high for every long?

"The image issue after the Model S battery fire and potential NHTSA probe were brought up."

Were brought up? Well that's definitive. :-/

You guys do realize this is an "upgrade".

"The Merrill Lynch team did downgrade Tesla to Underperform from Neutral back on February 21, 2013. Shares closed at $38.54 the prior day, so the team missed a major move to the upside in Tesla."

Now their target price is $45 so isn't this an upgrade to their previous report?

Yeah, I'm gonna listen to the two John's after they missed a 400% move in 7 months. Perhaps they have better batting average trolling the street walkers...

Tesla has problems delivering cars to Europe. Ordered buy the end of march-delivery (hopefully-not confirmed) mid/ end february. A 6 month or more is not OK for any car. I love the car and the company. Elon is a great man. But Tesla has to step up the game in order to deliver cars with 2-3 months here in Europe.

Agree with @AR but also remember that stock price is about future expectation, not current performance.


TSLA may be a bubble however its potential at this point can't be evaluated based off what other autos are doing or have done in my opinion.

That Merrill guy is an idiot! He is too stubborn to admit that he was wrong in the first place when he gave that $45 price target. He is married to the traditional car manufacturers and doesn't get why Tesla is different.

Now that the stock took a slight hit he comes out of his rat hole to proclaim that he was wrong all along - what an idiot.

Sorry, but I have been watching the stupidity of that particular analyst for quite some time.

Now that the federal government is up and running again, it appears that NHTSA is looking at the incident more closely. Though an official investigation has not begun, the agency is gathering information to determine if agency action is warranted.
Bank of America analyst John Lavallo II released a report Wednesday that called Tesla’s shares “vastly overvalued from a fundamental standpoint” amid the potential NHTSA investigation and concerns about Tesla’s ability to win over consumers in Europe.

I think an NHTSA probe will make the car come out looking like a champ.

But it needs to fix the connector and winter tires issues for Europe, stat.

Tesla will get the European launch right. Norway has been a great success and yes, incentives helped. Germany is toughest market in the Model S price range, with competition from Mercedes, Audi, Porsche. It will force Tesla to improve their cars. Model S will have to shed about 500-1,000 lbs. Battery pack needs to go to 500 KW-hr. Interior needs refinement. Supercharger network needs to be deployed and the charging speed increased.... which a 500 KW-hr battery would help.

Yes, short term the stock is vulnerable, but BEV will disrupt the ICE industry. Just like ICE disrupted the horse buggy.

@GDH: Did anyone ever think the stock would stay up that high for every long?
Well, there was a post a few days ago from someone who made a new Model S worth of profit, and was holding out on selling until it had gone up another 8x to cover the cost of his house... so yes, there are unrealistic expectations.

@Mathew98: Not exactly. An upgrade would involve a change in recommendation from Underperform. They changed the target price, but continue to predict the stock underperforming. I realize this is confusing, but picture the recommendations come in ranges. The target price may have gone up, but it still falls in the Underperform range, and thus this was not an upgrade.

Tesla is a small bubble that will inflate into a HUGE bubble that will not burst becuase earnings will eventually catch up to its market cap. This will take years (maybe 10 - 15) As production capacity grows Tesla will become a farily valued auto manufacturer. Until then there are huge opportunities to profit on that surge. So this BoA noise is just temporary. The John's clearly do not understand that we are at the cusp of a BEV revolution and they obviously have not driven the car.

What is all this hubub about failing to execute in Europe? I have seen no evidence of that. The German publication is just nationalistic pride that is about to get hurt. The deliveries that are a month or two later than originally scheduled are not surprising for an initial product roll-out. The Supercharger roll-out for Germany is actually impressive.

Q3 ER is gonna be a big surprise and guidance for 2014 is going to jack the stock back to the $190's and beyond. Its moments like this that create greaty buying opportunities for those of us that see the big picture and do not get flustered by useless valuation metrics. Those metrics are appropriate for mature companies. They make no sense for extreme-growth stocks like TSLA. Are these same people giving Wal-Mart and Amazon the same P/E?

Lastly, no one is making a big stink about Elon's comment that GenIII prototype will be out in 15 months. That is HUGE news. It validates that GenIII is real and is going to happen very soon. Gen III will take over the world.

This is the same game that Goldman played just before the Q2 earnings release. They managed to drop the price for two days and scooped up some cheap shares before TSLA rebounded sharply for the next two weeks.

Well, I'm gonna have use some of that dry powder to load up. Thanks JnJ, aka Beavis and Butthead!!!

@Mathew98 I agree with you on this one. The timing is very similar.

@Mathew98 & Fredlambert

It is like Deja Vu'.

I'm definitely not against getting in before the Model X rolls out :) Yummy.

@JZ13 +100
@Matthew98 +1

I took the opportunity to load up on call options today. Just because the investment bankers manipulate the market for their own gains doesn't mean the little guys can't jump in and make their own profits :)

I read the full report.
It's basically up to Tesla to prove them wrong.
I've seen bad reports hundreds of times
Quarterly earnings will tell the story.

I wish the stock would go down tomorrow a little bit more, so I can buy and buy. :))))

There seems to be a mission on Wall Street to drive Tesla Stock down. Analysts were hoping the debt ceiling fight would drive shares down so they could invest before congress made a deal to raise it. That tactic has failed so now Bank of America(just found guilty of fraud by U.S Government) attempts to drive stock down.

Bank of America may have ties to OPEC.

Oil Companies need to take aim at Tesla to keep OPEC profits high.

@JZ13 -- That's the most ridiculous perspective of the stock market I've ever heard.

Would you have bought MSFT in 1980 for it's share price in 1995 just because "it's a small bubble that will inflate to a huge bubble" ? No, of course not. You invest in 1980 for a reasonable price with the expectation that the current management and direction of the company will take your money and produce ROI better than other options in the market.

MSFT could just as easily have tanked in 1985.

TSLA could just as easily tank in 2015. Why would you pay optimistic 2025 prices for the share in 2013?

Some people are better EV afficionados than securities analysts.

My optimistic scenario is that Tesla is producing 700 cars/week based on the 2 month VIN average. Technically they should be able to ramp production to 1000-1200 cars/week with increased automation to material flow, final assembly as well continuous optimizing of the design to facilitate manufacturing.

Excluding the Li-ion batteries, the rest of the supply chain items are commodities. With volume, the suppliers will invest in automation to improve delivery and drive costs down. Panasonic is investing in plant and equipment to supply 1,200 cars/week. Another data point that indicates about Tesla's production goals.

With geographic and supercharger expansion in the US+Canada, Europe, Greater China, Japan, Tesla can sell at the rate of 50,000-60,000 cars/year in 2014. With ASP=90,000+, revenues would be $5.4B. Gross margins of 25% would mean gross profits of $1.35B. Overhead, R&D would chew at least $0.75B. Minimal taxes due to carry forward losses, depreciation, etc. Net profit $0.850B. With Model X in the works and GenIII being developed a PE of 50 would be a minimum with market cap of $42.5B.

Model X sales could match Model S. Look how the Cayenne is the number 1 seller with Porsche... more than 911 or Panamera.

Anyway, since when anybody has made money following analyst recommendations from ML/BAC? Those morons nearly bankrupted the country in 2009.

@jq5073 - I always believed MSFT went public on 3/13/1986.

Bank of America was found gultymof fraud today, I don't care about them I bet to Tesla long term, 5 to 10 years

Valuing stock on current fundamentals ignores its potential, and valuing based on potential is a black art no one has mastered.

+1 RedShift

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