May 23, 2018 / 5:52 PM / 3 months ago

Tesla shares poised to rise after 'fever pitch' of bad news - analyst

SAN FRANCISCO, May 23 (Reuters) - Immaterial negative news stories about Tesla Inc have hit a “fever pitch”, and the electric carmaker’s stock is set to surge as output of its Model 3 sedan improves, according to an analyst.

Baird Equity Research analyst Ben Kallo, in a note on Wednesday, said reports about factory accidents, employee turnover and production pauses have contributed to investor pessimism, but that sentiment would recover as the company fixes factory bottlenecks and increases output of its Model 3.

“Sentiment is as negative as we have experienced around Tesla, and we want to lean into the fever pitch,” wrote Kallo, one of nine analysts who recommend buying Tesla’s stock, according to Thomson Reuters data.

He called the substantial rise of negative Tesla headlines over the past month “increasingly immaterial.”

Another eight analysts recommend selling Tesla, and nine have neutral ratings.

Shares of Tesla remain down 9 percent since the Silicon Valley company reported quarterly financial results on May 2, when Chief Executive Officer Elon Musk refused to answer questions from analysts about the electric vehicle maker’s capital requirements, saying “boring, bonehead questions are not cool.”

Musk has repeatedly missed targets for Model 3 production, which Tesla is banking on to establish itself as a mass market seller of electric cars. Tesla’s stock has lost over a quarter of its value since closing at a record high last September.

A series of fiery Tesla car crashes and executive departures have also worried investors.

After Consumer Reports said on Monday that the Model 3 had “big flaws”, including braking slower than a full-sized pickup truck, Musk responded on Twitter that Tesla would fix the car’s braking system with a software update.

Tesla’s stock was off 0.1 percent on Wednesday at $274.65.

The mean analyst price target for Tesla has dipped to $289 from $326 a month ago. Kallo’s target of $411 is about 50 percent higher than Wednesday’s price.

On Tesla’s recent quarterly results conference call, Kallo commented that the flow of negative news stories about Tesla was making it difficult for even “believers” to own the company’s stock. Musk responded that investors worried about volatility should steer clear of Tesla’s shares. (Reporting by Noel Randewich Editing by Bill Berkrot)

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