Tesla Faces Huge Execution Risk Ahead, Analyst Says Stock Price Remains On Mars

With Tesla Inc TSLA stock “on another planet," Cowen Equity Research said the company is now entering an execution phase that hasn’t historically been its strength.

The Tesla Analyst

Cowen’s Jeffrey Osborne maintained an Underperform rating on Tesla, and raised the price target from $280 to $290.

The Tesla Thesis

Osborne said it's a positive that the company is taking advantage of "the staggering dislocation" between its stock price and what Cowen sees as its fair value to raise more capital. 

But, Osborne wrote in a note, "We still see a lot of execution risk in the growth story," at the electric car maker that has seen its stock shoot through the roof in recent weeks - and was up by more than 6% again on Tuesday.

Stock Price On Another Planet

Osborne said the company's current share price "remains on Mars."

He noted that Tesla is optimistic after having shown profitability in four out of the last six quarters, ramping up a new factory in China, and launched its new Model Y, but said it might be misplaced optimism.

"We continue to see the stock as extremely overvalued, and the mental gymnastics needed in both growth assumptions and buying in to the 'tech' multiple needed to make the math work are staggering for an auto company that has struggled to scale in the past," Osborne wrote.

The analyst said the Tesla stock story has "worked" in the past when it was ramping up new products or expanding to new markets - with investors moved by buzz. But now, Tesla is entering an "execution phase," Osborne said - and the company hasn't been as good at that as it has generating excitement about things to come.

TSLA Price Action

Tesla shares, which started the year at about $430 but recently soared past $800, were up again on Tuesday by nearly 6.5% at $851.96.

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