bull is a little more upbeat following the passage of the Inflation Reduction Act, which includes a $7,500 purchase tax credit for many electric vehicles.
Domingo, CFRA analyst Garrett Nelson
(ticker: TSLA) price target of $120, or about 11%, to $1,245 per share from $1,125.
“The signing of the Inflation Reduction Act was the equivalent of Christmas in August for Elon Musk & Co.,” Nelson wrote in his research update. He calls
the biggest winner of the new law since the company sells the two most popular EVs in the industry – the Model 3 and Model Y. He expects most Model 3 and Y models to qualify for the $7,500 purchase tax credit.
Previously, Tesla buyers did not qualify for any credits because Tesla had reached the manufacturer’s limit of 200,000 units. The cap was a feature of the old law – there were no more credits available when cumulative EV sales reached this level.
“The new law significantly alleviates concerns about EV competition, as about 70% of the 72 EV models currently on sale in the US have suddenly become ineligible for the tax credit under the new law,” added Nelson. EVs must be manufactured in North America to qualify for the new credit. This will exclude some EV models from, say,
(000270.Korea) that are assembled in South Korea.
Nelson’s target is based on a 60-fold multiple of 2024 earnings per share. He expects Tesla to earn about $20.75 a share in 2024, up from its previous estimate of $18.75. The Wall Street consensus for 2024 is around $20.20 a share.
With an average analyst price target of $884 per share, Wall Street appears to think Tesla is worth about 44 times its estimated earnings in 2024.
trade for about 16 and 20 times estimated earnings in 2024, respectively.
The $884 target is also right about where Tesla shares are trading. That’s not a big surprise, as Wall Street looks split on equities. Just over half of analysts who cover Tesla’s stake buy. The other half says ‘don’t buy’. The average buy rating rate for stocks on the S&P is about 58%, a few percentage points higher than Tesla. The analyst’s average price target implies gains of about 13% for a stock on the S&P.
Tesla’s ‘Do Not Buy’ ratings are roughly divided between Hold and Sell ratings. Tesla has a high sell rating for a major stock, with just under a quarter of analysts placing the most negative rating on the stock. The average Sell-rating index for a stock on the S&P is less than 10%.
The buy and sell rating disparity between Tesla and typical S&P stocks is one reason why Tesla tends to be more volatile than other stocks. Tesla tends to go up or down approximately twice as fast as the overall S&P 500.
Shares were down about 1.9% in Monday’s trading. S&P 500 futures are down about 1.2. This ratio is only 1.6 times. The double figure is just a general rule of thumb and anything can happen in a trading day.
Coming into Monday’s trading, Tesla shares are down about 16%, while the S&P and Nasdaq are down about 11% and 19%, respectively.