What happened
Shares of electric vehicle (EV) kingpin Tesla (TSLA 0.88%) dropped sharply in Wednesday early afternoon trading, falling 5.2% through 12:10 p.m. ET.
You can blame two Wall Street analysts for that drop: Piper Sandler and France's Exane BNP Paribas.
Image source: Getty Images.
So what
In twin reports this morning, first Piper Sandler cut its price target on Tesla to $1,035 per share (but maintained its overweight rating), and then Exane BNP Paribas cut its price target on Tesla to $600, and reiterated its underperform (i.e., sell) rating.
Of the two reports, I found the Paribas report much more interesting.
Piper's reason for cutting its Tesla price will come as no surprise to Tesla watchers: The analyst is worried COVID-19 restrictions in China will keep Tesla from hitting its target of producing 1.5 million cars this year. That doesn't worry me, though, because as soon as those restrictions are lifted, I expect Tesla to race ahead and regain its lost ground like a Model S Plaid with its pedal to the metal.
But Paribas' report does worry me -- a bit.
"Tesla ... is still among the best [EV stocks], with an impressive combination of range, charging speed and performance still its USP. However ... Tesla is no longer the stand-out it once was," reports StreetInsider.com in its coverage of Paribas' note today. After surveying 230 different EV models, and comparing the pros and cons of each, the French banker concluded that Volkswagen's EVs have now largely caught up with Tesla on product quality, while Lucid Group has better technology than Tesla, and General Motors has a better battery in the Ultium.
Now what
That all sounds like bad news for Tesla, except for one thing: So far, this is an opinion coming solely from Exane BNP Paribas. And when is the last time you asked a banker for car-shopping advice?
Not all readers will be old enough to remember this, but once upon a time there was a saying, "nobody ever got fired for buying IBM." (Do you remember that one?) The point being, just having the best specs doesn't guarantee a company will make a sale. Sometimes, if a company's reputation is good enough, consumers simply assume its products are the best, or buy them regardless, if they're the most popular or most desirable. So long as Tesla enjoys the halo of being considered the "pioneer" in EVs, having the longest track record making them, and being the prestige product in the category (kind of like an iPhone), I expect Tesla's sales are going to hold up just fine.
Granted, impressions can change, and if popular car magazines start saying what Paribas just said, this situation could change, too. But for the time being, I'd consider Paribas' warning more of a yellow flag than a red one for Tesla investors.
