Tesla Soars As JMP Downgrades Stock & Wedbush Predicts Profit For Q2 2020

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Palo Alto, California based electric vehicle and renewable energy products manufacturer Tesla Inc (NASDAQ:TSLA) has been witnessing a meteoric rise on the stock market following its vehicle deliveries for the second quarter of 2020 beating analyst consensus. Tesla's beat came at a time when economies all over the world are reeling from the impact of the coronavirus, and as its deliveries surpassed estimates, investors expressed their optimism about the company's earnings release due tomorrow.

Now, as we head towards one of the most crucial quarters in Tesla's history, investment bank JMP Securities is out with a rating downgrade for Tesla. The bank believes that the company's recent performance on the stock market will now cool down, and subsequently, analyst Joeseph Osha has downgraded Tesla to Market Perform from Outperform.

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Tesla Downgrade Based On Premise That Company's Immediate, Short Term Success Is Factored In Its Stock Price

To get an idea of Tesla's recent success on the stock market, a quick glance at trading data from yesterday provides insight into the market's extreme confidence in the company. During the four hours of trading from noon to close, Tesla's share price jumped from $1,500/share to $1,643 - reflecting a roughly 10% gain at the tail end of the day.

Yet, this gain pales in comparison to $TSLA's performance over the past thirty days, during which the stock has gained a staggering 65% in value as it jumped from $944 to yesterday's closing price. Looking at these movements, it's only natural for JMP to downgrade the stock especially as investment banks themselves have expressed heavy doses of optimism for Tesla over the course of this month following the company's vehicle delivery analyst estimate beat.

It's been nothing but UP for Tesla's share price for the last twelve months. (Data courtesy: Koyfin)

Wedbush Analyst Ives Predicts Profitability For Tesla In Q2 2020 On Back of 90K Vehicle Deliveries 

The details of the note sourced from aggregator The Fly reveal that JMP believes that all of Tesla's immediate term success has already been factored in the company's stock price. Given the limited details of note that are available, it's uncertain what the bank considers as 'immediate', with the term set to possibly reflect anything from the company's recent performance in the first half of 2020 to the remainder of the year.

However, analyst Osha has refrained from setting a new price target for Tesla. Price targets for the company have varied on the street, with Piper Sandler being the most optimistic of the bunch with a $2,322 price target for the company and Credit Suisse being more cautious through a $1,400 price target. Osha also expresses his optimism that Tesla has the potential to be worth $100 billion by the end of 2025, yet the analyst struggles. to find reasons to justify a valuation for the company that is above what Tesla is currently worth. Based on the company's closing price yesterday, Tesla has a $304 billion market capitalization.

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Vehicle deliveries will remain crucial for the electric vehicle maker this year, especially since it is yet to revise a self-set goal of half a million deliveries in 2020. Tesla set this goal before consumer purchasing power was disrupted in the post-pandemic world, and as we head into the company's earnings today, ears will be piqued for any revisions to this estimate.

Speaking of which, Wedbush analyst Daniel Ives who is known for his faith in Tesla is out with his own thoughts for the company. Ives believes that Tesla will show a profit this quarter – an event that will be spurred by 90,000 vehicle deliveries and gross margin (cost) efficiencies.

Following in line with his positive temperament for the company, Ives also believes that it's possible for Tesla to cross 450,000 vehicle deliveries this year and that investors will be scrutinizing battery day announcements, future Model 3 demand and outlook for China deliveries this quarter.

After gaining roughly 9% during the course of trading yesterday, Tesla's shares are up another 1.6% in pre-market trading at 08:47 ET with the stock price standing in near the $1,700/share price mark - as they surge towards meeting a previous record high price of $1,794 last achieved on July 13th, 2020.