Street Talk: Tesla Inc (TSLA), Apple Inc. (AAPL), Valeant Pharmaceuticals Intl Inc (VRX)
support@smarteranalyst.com (Ben Mahaney)
Updated
Tesla's CEO Shakes Investor Confidence
Tesla Inc (NASDAQ:TSLA) CEO Elon Musk is downplaying his brainchild, telling an audience at the National Governors Association summer meeting this past weekend that it is astounding even to him how much the electric car giant's price has climbed in the market. In fact, Musk himself voiced aloud thoughts daring to question if the stock's approximate 45% rally this year is even warranted- which is exactly what cautious investors needed to hear to send shares suddenly on an over 3% dip yesterday in reverse.
Musk ventured, "I've gone on record several times saying our stock price is higher than we have any right to deserve," perhaps out of apprehension from such lofty and eager expectations for his giant's performance to back the numbers. "I find it quite tough when there are very high expectations," explained Musk at the conference, finding the price more of a reflection of hopes instilled in a solid long-term pathway for the giant. Therefore, "I try to tamp down those expectations ... The stock reflects a lot of optimism about where Tesla will be in the future," Musk underscored.
However, rather than bolstering confidence in the stock, Musk's sincere comments did the contrary, shaking up investor certainty, proving Musk is both the maker and breaker of these roaring expectations.
Following the meeting that rattled Tesla share momentum, the CEO sent a Tweet to elucidate his thoughts on the giant's direction to try to add a more bullish spin, noting, "I should clarify: Tesla stock is obviously high based on past & present, but low if you believe in Tesla's future. Place bets accordingly …"
Most bets have been wagered with the forthcoming Model 3 launch in mind, the giant's debut mass-market model that Musk has goals to be producing 20,000 vehicles each month by the close of 2017. All eyes will be on Musk as he dials up and down hopes for his giant, and whether it's Model 3 success will ultimately justify beefed up expectations.
Is Tesla stock overvalued? TipRanks analytics indicate TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 6 are bullish on Tesla stock, 7 remain sidelined, and 4 are bearish on the stock. With a loss potential of nearly 7%, the stock's consensus target price stands at $298.14.
Everything's Coming Up Apple- It's Just a Matter of When, Not If
The question remains as to whether Apple Inc. (NASDAQ:AAPL) will set free its 10th anniversary edition iPhone model to a buzzing public in September or October- which could cause a dent in the tech titan's fourth fiscal quarter. Yet from the stance of Morgan Stanley analyst Kathryn Huberty, while the fourth fiscal quarter performance might come up short of Street expectations, the delay only postpone the titan's success, pushing sales forecasts up for 2018.
Not only is Huberty not swayed by "increasing evidence OLED iPhone launches in October, rather than September," she anticipated a huge winter and spring 2018 for Apple, leading her to maintain a Buy on Apple shares while boosting the price target from $177 to $182, marking a just under 22% increase from current levels. (To watch Huberty's track record, click here.)
Huberty asserts, "In light of the most meaningful feature and technology upgrades in iPhone's history — including OLED displays, wireless charging, and 3D sensors for AR — we believe it's reasonable to assume the new, higher-priced OLED iPhone ships in October rather than September," enthusiastic that the new OLED iPhone has potential to incite a sales "supercycle," for all the present owners of iPhones holding out for the highly anticipated iPhone 8 for the ultimate upgrade. In fact, the analyst believes her colleagues on the Street are underestimating this supercycle lure factor when calculating AAPL projections.
With the possibility for fiscal 2018 expectations to be driven up, the analyst opines that this “creates a dynamic of much better-than-normal December- and March-quarter seasonality."
FactSet places Huberty as the third bullish analyst on Apple based on her price target lift, and the analyst's vote of confidence on the stock has sent the titan on a seventh consecutive share gain yesterday. In addition to increasing her price target, Huberty likewise adjusts her EPS forecast for fiscal 2018 (kicking off in October) at 11% ahead of consensus, with revenue outlook another 13% over consensus.
Most of Wall Street seems to echo Huberty's sentiment, considering TipRanks analytics demonstrate AAPL as a Strong Buy. Based on 31 analysts polled by TipRanks in the last 3 months, 24 rate a Buy on Apple stock while 7 maintain a Hold. The 12-month average price target stands at $165.24, marking a 10% upside from where the stock is currently trading.
Valeant Checks Another $190 Million Off its Debt List- But Wells Fargo Is Not Impressed
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shareholders cheered after the biotech giant benefited from a $190 million sale to Shongua Finance Acquisition Fund on California skin care business Obagi Medical Products. Ever since former CEO Michael Pearson hightailed it out of the troubled biotech giant's premises with debt load restructuring shackles nipping at the company's heels, new CEO Joseph Papa has had quite an uphill battle on his hands. The goal: Take down at least $5 billion of the $30 billion ghosts of debts past by February 2018.
With iNova division, Dendreon, and skin care lines sold thus far, "The sale of Obagi marks additional progress in our efforts to streamline our operations and reduce debt," highlights Papa, who emphasizes, "As we continue to transform Valeant, we will remain focused on the core businesses that will drive high value for our shareholders."
However, a staunch Valeant naysayer, Wells Fargo analyst David Maris continues to point fingers at the troubled biotech giant. This time, Maris' contention lies in the fact that this sale is over 56% under the original $437 million the giant once paid for Obagi just four years ago.
In reaction, the analyst reiterates an Underperform rating on VRX stock without listing a price target. (To watch Maris' track record, click here.)
Maris concludes, "The transaction is expected to close in 2H17. VRX estimates full-year 2017 revenue would have been $85 million and adjusted EBITDA would have been $30 million, implying a valuation of 2.23x revenue and 6.33x EBITDA. Valeant did not indicate if there would be any write downs associated with this deal. VRX continues to make progress toward its asset sales and total debt reduction targets, although, in our opinion, leverage remains high and we do not believe that recent deals, including divestitures of iNova, Dendreon, and Obagi, have had a significant deleveraging impact."
The Street is mixed when it comes to Valeant, with TipRanks analytics exhibiting VRX as a Hold. Out of 15 analysts polled by TipRanks in the last 3 months, 3 are bullish on Valeant stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 4%, the stock's consensus target price stands at $18.00.
