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Tesla has taken a couple of public relations hits recently after a tragic Texas crash that might have been linked to inappropriate use of the company’s Autopilot driver-assistance feature, and after the company apologized in China for its handling of some customer complaints.
Wall Street is watching both issues. No one is changing ratings or target prices on Tesla (ticker: TSLA) stock. But they are paying attention because both issues—Tesla’s full-self-driving technology, or FSD, along with the Chinese electric-vehicle market—matter a lot for Tesla stock.
China, after all, is the world’s largest market for new cars and for EVs. And many of the most aggressive price targets on Wall Street include billions for FSD sales, and future robotaxi businesses.
“Autonomy, software and China are key lynchpins to the [Tesla] bull thesis,” writes RBC analyst Joe Spak in a Sunday research report. In particular, Spak believes self-driving features will be a bigger competitive differentiator than vehicle electrification down the road. “Any doubt over [Tesla’s] ability or increased regulation on the FSD/software products or performance in China could hinder the bull case.” He expects all the issues to be addressed in the company’s Monday-evening earnings conference call and expects Tesla to defend its safety record and technology.
In China, New Street Research analyst Pierre Ferragu doesn’t believe there is a brand image problem, adding that Tesla is a cult status brand in China. “ Elon Musk is also one of the most popular American business leaders in China and drives a strong social media presence with ~1.7 million followers on [social media platform] Weibo, more than [Apple CEO] Tim Cook, ” writes Ferragu in a recent research report. Ferragu adds that he believes press reports are negatively biased against Tesla. “Should investors worry about this? Probably not, negative stock reactions are getting shallower and shorter.”
He has a point. For Tesla stock, recent news has been a tempest in a teapot. Shares are actually up about 1% compared with prices prevailing just before the Texas accident. That’s a little better than comparable gains of the Nasdaq Composite and S&P 500 over the same span.
What’s more, having investors expectations about Tesla’s business in China tempered can be a good thing, according to Morgan Stanley analyst Adam Jonas. “This is a good thing,” writes Jonas in a recent research report. “Market expectations for Tesla in China long term are quite a bit too high.” Getting expectations in line for a high growth stock like Tesla can cut back on painful stock volatility.
Jonas rates Tesla stock at Buy with a $900 price target. That’s the same rating and target for Ferragu. Spak rates shares Hold and has a $725 target price. Cowen analyst Jeffery Osborne is a little more conservative, rating shares at Hold. His price target is $573 a share.
He is paying attention to Tesla headlines, which add to his overall caution. In addition to PR items linked to Texas and China, Osborne writes that he is worried about the global automotive-semiconductor shortage hitting production as well as rising EV competition.
Tesla stock is down about 18% from its 52-week high because there are a lot more things on investors’ minds. Addressing the issues successfully could propel shares higher in the short run, but that assumes Tesla is able to resolve issues to investors’ satisfaction.
Write to Al Root at firstname.lastname@example.org