Tesla, Inc. (NASDAQ:TSLA) stock is hit with another price target cut, but the analyst in question is bullish on the electric vehicle giant.
The Tesla Analyst: Jefferies analyst Philippe Houchois maintained a Buy rating for Tesla shares but reduced the price target from $1,250 to $1,050.
The Tesla Thesis: Tesla's fundamentals are exceptional, given the 50% compounded annual growth rate in deliveries and the flat 2021-2023 guidance that will likely generate a post-tax return on invested capital of over 60%, analyst Houchois said.
Tesla is set to generate free cash flow cash at a faster rate than it can build physical products and capacity, the analyst said. He expects the company to deploy the cash into higher battery vertical integration and/or captive financing to support affordability.
"Tesla continues to challenge the industry's business model at multiple levels by avoiding resource- and capital-intensive complexity," Houchois said.
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Tesla's operating performance continues to set transformation new standards of returns and resource efficiency, the analyst said.
Long-held fears of disruption from inside have come true, raising Tesla's risk profile," Houchois said.
"Enemy inside" and "Tesla bigger than Musk" is how Jefferies has been viewing the risks stemming from Musk's unconventional leadership and weak governance, the analyst said.
Now, there is an uncomfortable pile-up of negative news from ratings to polarizing political opinions and ethical questions, the analyst said. Musk's personality suggests resolution depends on him alone, he added.
Musk's low-filter communication style, though unsettling, has been useful in getting a piece of his mind regarding things such as implications of raw material shortages, manufacturing challenges, and future automation the analyst said.
Tesla Price Action: Tesla stock ended Wednesday's session 4.88% higher at $658.80, according to Benzinga Pro data. The stock was seen advancing 0.53% to $662.27 in premarket trading Thursday.
