Wall Street analysts weigh in on Tesla's potential path to privatization

Tesla Inc (NASDAQ:TSLA) CEO Elon Musk sent shockwaves through the market Tuesday afternoon after tweeting that the electric-automaker may go private.

Slightly before the tweet, the Financial Times reported that Saudi Arabia’s sovereign wealth fund had acquired a US$2bn stake in the company. Just when investors thought that was the big story of the day, the other shoe dropped.

Shareholders could either to sell at 420 or hold shares & go private

— Elon Musk (@elonmusk) August 7, 2018

News of the possible privatization sent Tesla shares soaring before being halted on impending news.

Now, with the dust settled, analysts are weighing in on the idea of taking the US$60bn automaker private.

Baird analysts are refuting the US$420 per share price mark, saying that shares may trade above that as shorts cover and investors look for a higher price to go private.

The analysts saw Tesla’s deal with the Saudi fund as a good sign.

READ: Tesla CEO Elon Musk takes Wall Street on a wild ride, considers taking electric automaker private

“We believe TSLA’s reported decision to not issue shares for the Saudi wealth fund is positive, as It highlights the company’s belief it can fund growth through internally generated capital,” wrote analyst Ben Kallo in a research note.

The analyst reiterated an Outperform rating with a price target of US$411.

While Baird analysts see the share price rising higher, JP Morgan analysts are disputing the shares’ current valuation.

Analyst Ryan Brinkman raised his price target to US$308 from US$195 on the possibility of privatization, but he maintains that Tesla shares are worth no more than US$195 per share based on fundamentals, as per a note summarized by TheFly.com.

While he’s unsure if the company will go private, he stated the tweets were “nevertheless declarative statements from the CEO of a public company which we feel should be considered seriously.”

The analyst kept an Underweight rating on the shares.

READ: Tesla may soon swing to a profit as Model 3 demand revs up

UBS analysts think the privatization consideration may just be all smoke and mirrors, a “look over here” maneuver from Musk.

Analyst Colin Langan thinks the proposition is a way for the CEO to change the conversation around the company, as per a note on TheFly.com. Similar to JP Morgan analysts, Langan doesn’t think the fundamentals have changed.

The analyst reiterated his Sell rating and $195 price target.

Shares of Tesla were down around 2% to US$371.51 in Wednesday pre-market trading.

Story by ProactiveInvestors