Jefferies Downgrades Tesla's Stock On Valuation, Unclear Battery Business Model

Jefferies cut its rating on Tesla Inc TSLA, saying there needs to be better understanding of its battery business model.

The Tesla Analyst

Jefferies analyst Philippe Houchois downgraded Tesla from Buy to Hold, but raised the price target from $600 to $800.

The Tesla Thesis

Houchois said the rating cut was pending a clearer view on Tesla's upcoming battery business model, which could come in the second quarter at a now important "Battery Day."

The stock's high valuation — shares are up 60% just since Jan. 14 — needs to be "grounded into some visibility on market size and potential profitability," Houchois said.

But, he wrote, "We continue to see Tesla as uniquely engaged in a positive sum-game in the EV transition against legacy OEMs facing more severe strategic choices."

Houchois also said Tesla's 2020 first quarter results could be a key catalyst.

"The combination of disruption in China and Model Y launch should yield a weakish Q1," Houchois wrote in the note.

TSLA Price Action

Tesla's stock was up less than 1% to $837.58 per share at time of publication.

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