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Tesla
bulls and bears continue to, indirectly, debate different points of the Tesla investment case. They seem to agree about one thing, though: It will take a long time to develop truly self-driving calls.
Still, bull/bear debates haven’t mattered much to Tesla (ticker: TSLA) stock these days with the market falling because of inflation and geopolitical fears.
Tesla shares were down 1.8% in premarket trading Monday.
S&P 500
and
Dow Jones Industrial Average
futures fell 0.8% and 0.7%, respectively.
Shares of Tesla can’t even get a boost from a target price bump. Piper Sandler analyst Alexander Potter raised his price target for Tesla to $1,350 from $1,300 Sunday evening after “refreshing our model to reflect insights gleaned from the [annual report].”
Of note, he now sees Tesla delivering 1.58 million vehicles in 2022, up 69% from 2021. Potter expects Tesla to deliver 11.8 million vehicles in 2030.
Potter also noted that some of Tesla’s deferred revenue was classified as a long-term liability in the annual report. That could signal self-driving development issues.
The bulk of Tesla’s deferred revenue is related to its full-self-driving, or FSD, software sales. FSD doesn’t make cars truly self-driving yet. But CEO Elon Musk believes his company is close to producing vehicles that can do all the driving in certain circumstances.
Tesla constantly updates its FSD software, making it better with each iteration. Software companies, and in this case Tesla, have to create a liability when they sell software to account for all the upgrades and updates which are, essentially, purchased at the time of sale.
Tesla doesn’t charge drivers each time a new version of FSD rolls out.
Calling the deferred revenue a long-term liability might indicate a delay in achieving truly self-driving cars, said Potter. That doesn’t change his bullish thesis on the stock, though.
Bernstein analyst Toni Sacconaghi also addressed self-driving cars in a research report on Monday. He too believes Tesla will take longer to self-driving cars than investors expect, writing that he believes Tesla will not be the first company to commercialize self-driving robotaxis. The mismatch between self-driving reality and self-driving expectations is one reason he has a Sell rating on Tesla stock.
Sacconaghi’s price target is $300 a share, more than $1,000 below Potter’s.
Neither call is the most likely reason shares are moving Monday. Broader market fears seem to be the bigger issue. Monday’s fears are a continuation of last week’s problems.
Tesla shares dropped 4.9% Friday, falling late in the day after the U.S. and U.K. governments recommended their citizens leave Ukraine ahead of a potential Russian invasion. Shares dropped 2.9% Thursday after U.S. inflation data came in higher than expected for January. Consumer prices rose 7.5% year over year. That reading puts pressure on the Federal Reserve to raise interest rates and higher rates hurt richly valued growth stocks, such as Tesla, more than others.
The Tesla bull/bear debate will continue to rage on Wall Street. It will just take a back seat to other concerns for a while.
Write to Al Root at allen.root@dowjones.com