Tesla Falls as 2 Analysts Express Caution

JPMorgan is worried about valuation while BNP takes issue with the idea that Tesla is a tech company.
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Tesla  (TSLA) - Get Report has been on a tear in 2020, but analysts at JPMorgan and BNP Exane tapped the brakes on the stock’s ascent in a pair of bearish notes that take issue with its current valuation and perception as a tech company, respectively.

Analysts at JPMorgan reiterated their December 2020 price target of $240 per share despite the stock’s current trading price above $560 per share. That valuation is out of whack with JPMorgan’s analysis of the company as the company’s recent push past $100 billion in market capitalization puts it past Volkswagen and only behind Toyota as the  world’s most valuable car company.

“Investors bid up Tesla shares to this valuation in part because of the on-time debut of the company’s first assembly plant in China. But Volkswagen is already the largest automaker in China, in 2018 selling 4.2 million vehicles with an 18.5% market share while generating a €4.6 billion operating profit (just in China),” JPMorgan’s note said.

Volkswagen sold 10.8 million vehicles in 2018 compared to Tesla’s 2019 sales total of just 367,500. JPMorgan notes that all of the bull cases for Tesla are highly speculative.

“We continue to urge caution with regard to Tesla shares, which appear highly overvalued based on our understanding of the fundamentals,” the note states.

Meanwhile, BNP analyst Stuart Pearson downgraded the stock to hold from buy while still maintaining an overall optimistic view of the company. However, he says that the idea that it is a tech company is overblown.

"Tesla remains uniquely well placed to capitalize on a 2020 boom in global [electric vehicle] demand," wrote Pearson. "The debate has shifted beyond the realms of the pure [battery-electric vehicle] story to an energy and tech-play vision with which we are less comfortable."

Tesla shares were falling 1.27% to $564.96 on Friday late morning.