Tesla Falls as Longtime Bull Recommends Investors Take Profits

Tesla's valuation is roughly double that of GM and Ford combined following a months-long hot streak that has doubled the price of shares.
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Even some of Tesla’s most ardent bulls have reservations about its sky-high valuation. 

Shares of Tesla (TSLA) - Get Report have seen a big run-up over the past few months, skyrocketing over 80% since the carmaker posted a surprise third quarter profit in October. 

In a note on Thursday, Baird analyst Ben Kallo recommended “profit taking” on Tesla holdings, writing: “While we remain constructive on [Tesla’s] long-term prospects, we now believe estimates are properly calibrated—particularly on the buy-side—and valuation appears more balanced.” Kallo cut Baird’s rating to Hold from Buy, but also jacked up its price target to $525.

Shares of Tesla were falling 1.5% to $484.92 on Thursday afternoon.

Tesla’s market cap of roughly $85 billion places it well above established carmakers like GM (GM) - Get Report ($50 billion valuation) and Ford (F) - Get Report ($37 billon), despite selling many fewer vehicles -- a situation that has raised eyebrows among other investors as of late. And the carmaker faces plenty of questions about whether it can be consistently profitability and sustain demand for its vehicles. 

In late December, Morgan Stanley analyst Adam Jones cautioned that Tesla's valuation may not hold up over the long term, writing that the electric car upstart could be viewed more like a traditional automaker over time.

“We are prepared for a potential surge in sentiment through 1H20 but question the sustainability,” Jonas wrote on Dec. 24.

A streak of positive reports have sent Tesla shares on a historic run since October.

In the weeks since Tesla’s well-received third quarter financial results, investors have seen progress in its Shanghai Gigafactory, including a colorful launch event kicking off Model Y production at the new facility. Weeks ago, media reports indicated that Tesla is looking to expand production both at the China facility and in Europe.

On Jan. 3, Tesla reported that 112,000 vehicle deliveries in the third quarter, ahead of consensus estimated of 106,000. That figure rounded out 367,500 vehicle deliveries for the year, narrowly exceeding its prior guidance of 360,000 and 400,000 deliveries for 2019.

Tesla is expected to post its full fourth quarter results on Jan. 29 after close of trading.