No matter how we look at it, Tesla stock is insane and Wall Street is falling behind

Unfortunately for the Wall Street analyst tasked with covering Tesla (TSLA -2.10%) stock. It is not an easy task.

Consider recent ratings, price goals, and stock trading. On Thursday, BOFA Securities analyst John Murphy raised his price estimate for Tesla shares from $225 to $300.

This increase in his price estimate has had little effect on Tesla stock. In lunchtime trade, the stock was down nearly 3% to $275.40. The S&P 500 (SPX -0.79%) was down 1.3%, while the Nasdaq Composite (Comp -0.82%) was down 1.4%. Despite Thursday’s decline, Tesla stock is still up approximately 6% in the last week.

Murphy’s price goal is currently barely short of the top among major brokers. According to FactSet, RBC analyst Tom Narayan has a $305 target and a Buy rating. Murphy ranks shares as Hold, despite his expectation that they will rise another 10% from current prices.

Murphy’s adjustment involves some modifications to news estimates as well as some adjustments to valuation multiples. His revised price objective, for example, works out to 25 times his projected 2025 earnings before interest, taxes, depreciation, and amortization, or Ebitda. His previous objective was 20 times forward year Ebitda.

That’s a very uninteresting, albeit important, argument for a 33% price increase. Regardless, that’s a significant increase, and today’s stock rise appears somewhat odd in light of that.

Let’s look at some more Wall Street quirks. Tesla shares are rated Buy by Deutsche Bank analyst Emmanuel Rosner and Mizuho analyst Vijay Rakesh, but their price targets are $270 and $230, respectively. A Buy rating paired with a modest price goal is unusual. 

Tesla stock is trading roughly $60, or 28%, higher than the average analyst price objective of about $217 per share. That, too, is unusual. The average price objective for S&P 500 stocks is 10% to 15% higher than the stock’s current price.

Analysts are struggling to keep up with Tesla’s stock trading. In just six weeks, the stock had increased more than $100 per share. The stock is extremely volatile, about three times that of Apple AAPL +0.25% (AAPL).

Analysts are working hard to keep up. According to ratings aggregators such as FactSet, Tesla’s ratings have changed 13 times so far in 2023, with three upgrades and ten downgrades. That’s a lot of adjustments. In 2023, Apple’s ratings changed five times, all of which were downgrades.

Of course, Tesla shares trade more frequently than Apple shares. According to Dow Jones Market statistics, Tesla has the greatest cumulative trading volume of any US stock in 2023, with about 20 billion shares changing hands.

Simply put, Tesla is the most popular stock in the United States. That makes it out of the ordinary. That can be a pain, but it can also be an opportunity.

Key notes:

• Wall Street analysts assigned to cover Tesla stock face a challenging job due to the volatility and unpredictability of the stock.
• Recent ratings, price targets, and stock trading for Tesla have been inconsistent and difficult to predict.
• Tesla’s stock is highly popular and traded frequently, making it more challenging for analysts to keep up with its movements.

Risk Disclaimer

Please note that this articles does not offer any instructions or suggestions regarding investment decisions. Therefore, it is essential that you carefully evaluate your financial situation and conduct thorough analysis, or seek advice from a qualified professional, before making any investment decisions.