Tesla (TSLA) 'D' Fails to Impress - BofA/Merrill Lynch

BofA/Merrill Lynch analyst John Lovallo weighed in on Tesla Motors (NASDAQ: TSLA) following the "D" announcement calling it much ado about nothing.

Lovallo notes the dual motor, AWD Model S was widely expected. The "something else" was driver assist content, most of which is already widely available throughout the auto industry. The company also said it is exploring a potential Certified Pre-Owned (CPO) vehicle program, in or around 2016, when the first resale value guarantee Model S sedans reach three
years of age.

"Overall, we believe last night’s event and recent news may fail to impress investors and potentially take some wind out of the sails of the bulls," the analyst said.

"While Tesla’s updates are incrementally positive, we believe they largely fall into the category of “catch-up” versus existing offerings of incumbent OEMs," the analyst said. "For example, Mercedes introduced an all-wheel-drive E-Class in 1985 and today Subaru offers this technology standard on almost all of its new vehicles. Also, while Advanced Driver Assistance Systems (ADAS) are clearly evolving each year, technologies such as adaptive cruise control, lane departure warning, seat belt activation, and brake assist could be found on the 2011 Audi A8 and are available today on most Model S competitors. In addition, variations of Tesla’s speed-limit sign reader technology are already offered by several companies, including BMW and Mercedes. Finally, nearly all established OEMs, both luxury and mass-market, offer CPO programs and therefore this effort would also not serve as a differentiator for Tesla."

Lovallo said the hype around last night's event may have set the bar too high, which could give the momentum driven shares a hangover. The analyst notes shares are up 9% since the cryptic tweet on 10/01. The snap-backed followed a 16% decline in Tesla stock that was largely driven by CEO Musk’s statement indicating that he believed the company’s shares were overvalued.

Lastly, Lovallo said while Tesla has done a very good job marketing its brand and seemingly shifting investor focus at will, this trend "could present a meaningful risk for shareholders, particularly considering the significant delivery volume, lofty margins, and pure execution already factored into the current share price and overall bull thesis."

The firm maintained an Underperform rating and price target of $75.00

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $257.01 yesterday.

You May Also Be Interested In

• Tesla (TSLA) cuts US growth content team - Bloomberg
• Tesla (TSLA) erases gains, drops to $140 again
• BofA Securities Starts Madrigal Pharmaceuticals (MDGL) at Underperform, 'pivoting to Rezdiffra commercial dynamics'