Analysts at HSBC Express Concerns Over Timing and CEO Elon Musk
HSBC analysts, led by Michael Tyndall, have raised doubts about the timing and potential risks associated with Tesla Inc.’s projects, while acknowledging CEO Elon Musk’s charismatic influence on the company’s success. This skepticism has led them to rate Tesla’s stock at the equivalent of a sell, with a price target of $146. Should this target be met, it would reflect a decline of more than 30% over Thursday’s prices.
The HSBC analysts attribute their caution to the uncertainty surrounding the timing and commercialization of Tesla’s ambitious ideas. While they recognize the considerable potential in Tesla’s prospects and concepts, they perceive the market and valuation to underestimate the length of time required for these ideas to come to fruition.
However, the analysts also note that Tesla is not solely an auto company. Although its electric vehicles (EVs) currently drive revenue and profits, the company envisions a future beyond automobiles. This vision includes the integration of robots, autonomous vehicles, energy storage, and supercomputers to shape the next phase of Tesla’s growth.
It is important to acknowledge that many of these ideas are still in the concept stage, indicating that there is undoubtedly optimism priced into the stock at its current levels. The analysts’ concerns stem from this realization, highlighting the need for a cautious approach when evaluating Tesla’s future potential.
The Charismatic CEO and the Risks for Tesla
Tesla, a company known for its electric vehicles, has gained significant customer awareness without relying heavily on marketing and advertising. Instead, Tesla’s CEO, Elon Musk, with his “charismatic and convincing” personality, has played a crucial role in supporting the company’s valuation.
However, analysts have raised concerns about the potential risks associated with Musk’s prominence. They argue that Musk’s influence presents a considerable risk, as his personal image is closely tied to Tesla’s success.
The analysts also discuss the future of Tesla, assuming the success of various projects such as Full Self Driving, Tesla’s advanced driver-assistance systems for urban driving, the Dojo supercomputer, and the Optimus robot. While these projects hold promise, the analysts believe that the expected cost of capital should be higher than Tesla’s average due to regulatory and technological challenges.
In contrast to the sell rating from HSBC, most Tesla analysts remain bullish. A majority of the 46 analysts polled by FactSet have either a buy or hold rating on Tesla’s stock. Only a small number of analysts have a sell rating.
Tesla’s stock has performed exceptionally well this year, outpacing the S&P 500 with a 76% increase compared to a 14% gain for the index.
Conclusion
While Musk’s influence has undeniably contributed to Tesla’s success, it also poses risks for the company. The future of Tesla largely relies on the successful execution of its advanced projects while navigating complex regulatory challenges. Despite this, the majority of analysts remain optimistic about Tesla’s prospects, driving the stock’s impressive performance this year.