Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Wall Street analysts weigh in on Tesla's potential path to privatization

Tesla CEO Elon Musk tweeted Tuesday afternoon that the electric-vehicle maker is considering going private
Tesla dealership
The news sent Tesla shares soaring before being halted on impending news

Tesla Inc (NASDAQ:TSLA) CEO Elon Musk sent shockwaves through the market Tuesday afternoon after tweeting that the electric-automaker may go private.

Slightly before the tweet, the Financial Times reported that Saudi Arabia’s sovereign wealth fund had acquired a US$2bn stake in the company. Just when investors thought that was the big story of the day, the other shoe dropped.

News of the possible privatization sent Tesla shares soaring before being halted on impending news.

Now, with the dust settled, analysts are weighing in on the idea of taking the US$60bn automaker private.


Baird analysts are refuting the US$420 per share price mark, saying that shares may trade above that as shorts cover and investors look for a higher price to go private.

The analysts saw Tesla’s deal with the Saudi fund as a good sign.

READ: Tesla CEO Elon Musk takes Wall Street on a wild ride, considers taking electric automaker private

“We believe TSLA’s reported decision to not issue shares for the Saudi wealth fund is positive, as It highlights the company’s belief it can fund growth through internally generated capital,” wrote analyst Ben Kallo in a research note.

The analyst reiterated an Outperform rating with a price target of US$411.

JP Morgan

While Baird analysts see the share price rising higher, JP Morgan analysts are disputing the shares’ current valuation.

Analyst Ryan Brinkman raised his price target to US$308 from US$195 on the possibility of privatization, but he maintains that Tesla shares are worth no more than US$195 per share based on fundamentals, as per a note summarized by

While he’s unsure if the company will go private, he stated the tweets were “nevertheless declarative statements from the CEO of a public company which we feel should be considered seriously.”

The analyst kept an Underweight rating on the shares.

READ: Tesla may soon swing to a profit as Model 3 demand revs up


UBS analysts think the privatization consideration may just be all smoke and mirrors, a “look over here” maneuver from Musk.

Analyst Colin Langan thinks the proposition is a way for the CEO to change the conversation around the company, as per a note on Similar to JP Morgan analysts, Langan doesn’t think the fundamentals have changed.

The analyst reiterated his Sell rating and $195 price target.

In a blog post following the tweet, Musk pointed to the “enormous pressure” put on the company by the quarterly earnings cycle, causing the automaker to make decisions right for the quarter but not necessarily right for the long-term.

Morgan Stanley

Morgan Stanley analysts say that while they are understanding of that struggle, they wonder if the capital markets will be able to support a leveraged buyout and if Tesla can support greater financial leverage.

READ: Cost to insure Tesla's debt rises amid default fears after leaked memo: reports

While being out of the limelight may be a better option in some respects, the analysts note that the automaker has relied on the public market to fund its plans since 2010.

“Taking the company private would assume one of 2 factors changing: (1) that the company is on the verge of generating self-sustaining cash flows or (2) that the company can tap into a range of strategic sources of capital not previously at its disposal,” wrote analysts.

The analysts view the benefits of taking the company private are outweighed by the risks of added financial leverage.

Morgan Stanley reiterated an Equal Weight rating with a price target of US$291.


RBC analysts also sympathized with Musk’s sentiment on how quarterly metrics can shift focus away from long-term goals.

However, the analysts were concerned about the automaker’s ability to raise capital as a private company and whether current shareholders would stay on board. Holding onto investors may be dependent on who provides the outside funding.

“In our view, sovereign funds (broadly), cash rich tech companies, Chinese sources and large VCs could all be potential candidates to provide funding,” wrote analysts.

RBC reiterated a Sector Perform rating with a price target of US$315.

Shares of Tesla were down around 1.5% to US$374 in Wednesday afternoon trading.

--Updated to add analyst commentary and current share price

View full TSLA profile View Profile

Tesla Inc Timeline

Related Articles

November 19 2017
When finalised, Iplayco will own the IP rights to the Play Mart and Play Planet brands, as well as the Play Planet line of business. .

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use