HSBC analysts initiated research coverage on Tesla (NASDAQ:TSLA) stock with a Reduce rating and a $146 per share price target.
The target implies nearly 35% downside risk from Wednesday’s closing price. HSBC’s valuation model assumes that Tesla’s businesses like FSD, Dojo, and Optimus are all successful by 2030.
“We think, however, that the expected cost of capital for these businesses should be well above the group average given the regulatory and technological challenges they face,” the analysts said in a client note.
Analysts see Tesla’s CEO Elon Musk as both an asset and a risk.
“Elon Musk’s global fame has afforded the group a customer awareness that far outweighs the money it has spent on marketing and advertising, which is therefore a tangible benefit to the P&L. Leaving aside the current legal issues Elon Musk faces, we think his prominence presents a considerable “singleman” risk at the group,” they wrote.
On the fundamental side of the business, the analysts see the timing of delivery as their primary concern. Tesla has ambitious plans to get to 20 million EVs by the year-end of 2030.
“We see considerable potential in Tesla’s prospects and ideas, but we think the timeline is likely to be longer than the market and valuation is reflecting. Hence the Reduce rating.”
Overall, the analysts say the market is too optimistic on Tesla as “there is a fair degree of hope in the current share price.”
Tesla stock is down 0.6% in pre-open Thursday.