Trends in the auto industry all point toward a strong fourth quarter, Citigroup said, prompting analyst Itay Michaeli to raise his price targets on shares of Tesla,Ford Motor,and General Motors.
“We are raising our 2021-23 EPS estimates to reflect strong Q4 trends, particularly in the U.S.,” Michaeli wrote in a research note.
Michaeli’s new price target for Tesla (ticker: TSLA) is $262, up from $236. The analyst cited improving supply-and-demand dynamics, where despite near-term margin headwinds the electric vehicle supply will remain strong enough to drive year-over-year margin expansion.
Michaeli is one of eight analysts surveyed by FactSet who rate the stock a Sell, with a price target significantly below Wall Street’s mean consensus of $861.41. The analyst’s Sell rating reflects Citi’s view of the high risk associated with the current valuation, he said.
“If we look at the time when a handful of other companies neared Tesla’s current market cap, they did so generating ~8x more gross profit (on average) than Tesla’s current 2021 consensus and ~3x more than Tesla’s 2025 consensus,” Michaeli added.
Tesla stock was up 0.4% to $1,090.37 on Thursday. It had traded lower on news that the EV maker recalled hundreds of thousands of Model 3 and Model S cars.
Michaeli was more bullish on General Motors (GM), maintaining a Buy rating and raising his price target to $96 from $90. He sees GM benefiting from new launches of its ICE trucks and electric vehicles, and a positive supply-and-demand cycle.
“GM remains our top pick,” Michaeli wrote, even though the shares have underperformed since the departure of the CEO of the company’s autonomous vehicle branch, Cruise.
General Motors also was chosen as one of Barron’s top stock picks for 2022.
Michaeli also increased Ford’s (F) price target to $23, up from $20, to reflect the industry’s strong fourth-quarter trends and U.S. demand. Ford’s continued execution, including on electric vehicles, will continue to bring the company upsides, he added. The analyst reiterated a Neutral rating on the stock.
“We continue to see greater relative upside at GM, but we maintain a constructive stance on Ford, as the long-term risk/reward proposition continues to improve,” Michaeli said.
GM stock was up 2.3% to $58.53, while Ford gained 0.6% to $20.69 on Thursday.