Are Tesla Shares Finally About to Slow Down?

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October 2, 2013 | Comments (0)

While Fools should generally take the opinion of Wall Street with a grain of salt, it"s not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind
the call makes sense.

What: Shares of Tesla Motors (NASDAQ: TSLA ) slipped 2% in early Wednesday trading after Baird downgraded the electric vehicle maker from outperform to neutral.
So what: Baird analyst Ben Kallo left his price target on the stock at $187 per share -- representing about 3% worth of downside to yesterday"s close -- implying that Tesla"s risk/reward at this point is particularly unattractive. While Kallo applauds management"s recent successes -- Model S, breakthrough battery technology, strong brand appeal -- he believes that the stock is now priced for flawless execution going forward, significantly limiting investor upside.

Now what: Kallo says that the next couple of years or so will be very telling ones for Tesla. "TSLA has several significant milestones over the next 18 months including continued production ramp and the introduction of the Model X," said Kallo. "We believe solid execution on both of these fronts is already priced into the stock, and any hiccups in execution present stock price risk in the near to intermediate term." With the stock up a staggering 560% in 2013 and trading at a price-to-sales ratio of 17, it"s tough to argue that there"s a wide margin
of safety built into the valuation.

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