There’s never a dull moment with Tesla (TSLA). Bear or bull, the news flow is almost constant, although the latest headlines are no doubt another tasty meal for the former camp.
On Saturday, the EV pioneer began the recall of over 285,000 vehicles in China, due to a safety risk regarding a cruise control feature.
According to China's State Administration for Market Regulation, the Tesla autopilot system can automatically turn on when drivers attempt to shift gears or touch the gear selector by mistake, resulting in accidental acceleration, which could potentially lead to crashes.
The recall covers roughly 211,000 locally made Model 3 vehicles and 36,000 imported ones, and an additional 38,000 Model Ys – amounting to almost all of Tesla’s Chinese deliveries in recent years. The vehicles themselves will not be returned, as the recall will be done remotely via an online software update or the software will be delivered in-person.
This a “moment of truth for Tesla,” says Wedbush analyst Daniel Ives. Over the last year, the company has fought against the negative PR issues concerning autopilot in China, and the latest gaffe is a “clear ‘black eye moment’ for Musk & Co. in this key region.”
With the negative PR issues pling up in a market which by next year is poised to make up 40% of global deliveries, this is clearly not the news the bulls were hoping for.
“That said,” the 5-star analyst goes on to say, “Now it’s about Musk & Co. making sure these issues are in the rear view mirror, correcting software/autopilot problems, and moving forward to make sure this situation is not a defining negative chapter in the Tesla China story.”
While Ives believes the situation is tantamount to a “bump in the road,” the analyst says Tesla needs to sort out the autopilot safety issues once and for all, for this “PR black cloud” to eventually fade into the distance.
Overall, however, there’s no change to Ives’ bullish stance; the analyst rates TSLA shares an Outperform (i.e. Buy) along with a $1,000 price target. The implication for investors? Upside of a hefty 49%. (To watch Ives’ track record, click here)
So, that’s the Wedbush view. What does the rest of the Street have in mind for TSLA? The analyst consensus is that the stock is a Hold, a rating based on 10 Buys, 7 Holds and 6 Sells. The projection is for the share price to decline ~11% over the coming months, given the average price target currently stands at $608.36. (See TSLA stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.