Tesla’s Shares Fall After It Recalls Over 475,000 Cars on Technical Issues

Tesla’s shares fell on Thursday after the U.S. road safety regulator said the electric-car maker will recall more than 475,000 cars on technical issues that increase the risk of crashing.

According to the National Highway Traffic Safety Administration, opening and closing the trunk may damage the cable harness for the rear-view camera and prevent the image from displaying.

In a statement from the NHTSA, Tesla said it identified 2,305 warranty claims that may be caused by one or both of the problems. However, the company was not aware of any crashes, injuries, or fatalities associated with the problems, according to a Bloomberg report.

Following this, Tesla slumped to a one-week low, falling as much as 3% to $1053.15 on Thursday. It surged over 52% so far this year.

Analyst Comments

“Tesla has been one of the hottest momentum plays in the current market. The company’s execution has been solid, despite the Covid-19 pandemic and the ongoing semiconductor shortage, with deliveries on track to rise by almost 70% year-over-year in 2021. Tesla is also confident of growing deliveries at a rate over 50% each year over a multi-year period as it expands vehicle production facilities in Berlin, Texas, and Shanghai, and launches new models. The accelerated shift toward green and more sustainable forms of energy is also driving greater investor interest in Tesla, which remains the top global EV play,” noted equity analysts at TREFIS in its Dec 13 note.

“While Tesla’s recent execution has been commendable, we remain negative on Tesla stock at its current valuation. With a market cap of about $1 trillion, Tesla trades at a relatively lofty 120x projected 2022 earnings and is essentially valued higher than the ten largest automotive companies combined. We think this is excessive for a couple of reasons. Firstly, it’s likely that the EV market is going to get a lot more competitive. The barriers to entry aren’t too high, the products are not too complex compared to internal combustion engines and mainstream automotive companies are investing in building massive scale. We don’t think that Tesla is going to corner the auto market in the long run given that car buyers like variety. If mainstream players eventually deliver compelling EVs that are well-received with customers, it could change the narrative around the auto majors, and potentially hurt the valuation of pure-play EV players such as Tesla,” TREFIS analysts added.

Tesla Stock Price Forecast

Twenty-seven analysts who offered stock ratings for Tesla in the last three months forecast the average price in 12 months of $1,016.68 with a high forecast of $1,580.00 and a low forecast of $215.00.

The average price target represents a -5.84% change from the last price of $1,079.7 Of those 27 analysts, 14 rated “Buy”, eight rated “Hold” while five rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1200 with a high of $1600 under a bull scenario and $500 under the worst-case scenario. The firm gave an “Overweight” rating on the electric vehicle producer’s stock.

“A double-fly-wheel. We believe Tesla can leverage its cost leadership in EVs to aggressively expand its user base and over time generate a higher % of revenue from recurring/high-margin software & services. Services drives the upside. We forecast Tesla’s services EBITDA to account for 17% of total EBITDA by 2030 & 37% by 2040. Includes: FSD, infotainment, upgrades, charging, maintenance, telematics, etc,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Valuation supportive vs. tech. Including Services, Energy & Insurance in our forecast, at $1,200, Tesla trades at 14x 2030 EBITDA and 3x 2030 sales. Expensive vs. auto but not vs. software/tech. Growth: We forecast Tesla to sell 8.1mm units by 2030 and grow total revenue at a 30% 10yr CAGR.”

Several other analysts have updated their stock outlook. New Street Research raised their target price to $1,580 from $1,298 and gave the stock a “buy”. Argus lifted their price objective to $1,313 from $1,010 and gave a “buy” rating on the electric vehicle producer’s stock.

Technical analysis also suggests it is good to buy as 100-Day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

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