Tesla Inc CEO Elon Musk dances onstage during a delivery event for Tesla China-made Model 3 cars in Shanghai, China, January 7, 2020. Aly Song | Reuters

More than a dozen Wall Street firms have adjusted their ratings or price targets on Tesla shares since the beginning of the year, playing catch-up after stock of Elon Musk's electric-car maker more than doubled in the past three months. Analysts who missed the rally have tried to explain away why they were wrong on Tesla's stock. Some skeptics even stuck by bearish outlooks, while they simultaneously were forced to increase their price targets to accommodate for the rally. For example, Credit Suisse, which has a sell rating, tried to explain that Tesla's blistering climb was still within its expectations, because "Tesla can be a volatile momentum stock in either direction given very wide theoretical scenarios for the company." "To us, it's not necessarily about being bearish or bullish but rather risk/reward. The potential [long term] reward side of the equation hasn't really been an issue for us," Credit Suisse said. The firm declared the note was to intended "take a step back to consider whether the reward side of the equation has meaningfully changed." Yet its conclusion was that there was "no change to our stock views," expecting Tesla shares will fall nearly 60% in the year ahead.

Analysts' explanations for their new numbers varied as widely as the range of expectations for Tesla's future performance. Wall Street is more deeply dived in its view of Tesla than for any other stock and that gap does not appear to be closing anytime soon. While optimists doubled down, even those analysts caught in the middle of the bull and bear fight tried to explain missing the rally. Tesla's stock has rallied more than 100% in the past three months, boosted by record quarterly deliveries and the opening of a new factory in Shanghai. Tesla shares climbed past the $500 level on Monday and neared $550 on Tuesday as the stock continues its almost daily push to new all-time highs.

Pessimists' explanation for missing the rally

Five firms with the equivalent of sell ratings on Tesla shares have written updates to investors since 2020 began, with a couple raising their targets to account for the stock's higher price. Citi stuck by its $222 price target, saying Tesla has had "an impressive year-end rally albeit underperformance for the year." "Clearly, Tesla can be a volatile momentum stock in either direction given very wide theoretical scenarios for the company. To us, it's not necessarily about being bearish or bullish, but rather risk/reward ... our main issue since our downgrade (post the go-private saga) was the degree of cumulative risk in areas like balance sheet, contingent liabilities, arguably low earnings quality, profit/FCF sustainability, management departures, etc. Since we don't think these risks have gone away (though a few have abated somewhat), in this note we take a step back to consider whether the reward side of the equation has meaningfully changed." To become more bullish on Tesla, Citi said it wants to see how the company's first-quarter production turns out and how much demand there is for the coming Model Y vehicle. CFRA believes Tesla is "fully valued" after its run-up, noting that the stock bottomed at about $177 a share only seven months ago. "We see the recent China factory start-up weighing on Automotive gross margins in [the first half of] 2020 and U.S. sales being negatively impacted by the recent phase-out of its federal EV tax credit, rising competition and seasonality ... We also see heightened risk of equity issuance, which would help de-risk the balance sheet but be dilutive to EPS." Credit Suisse raised its Tesla price target significantly, to $340 a share from $200, but stuck by its underperform rating. The firm said its updated estimate "gives credit to Tesla in multiple ways, yet is still well below Tesla's current stock price." "The framework contextualizes the lofty assumptions embedded in the stock – to justify the current stock price one arguably must assume that by 2025 Tesla will grow annual volume to 1.2mn units." Barclays on Jan. 5 stuck by its underweight rating and $200 price target, in a note titled "bears in hibernation." "Despite overvaluation, difficult to press short case near term. With TSLA posting a delivery beat on top of seemingly unstoppable share price momentum since the surprise 3Q19 profit, the bull narrative seems to have shifted from Tesla disrupting multiple industries ... to Tesla being a profitable and growing next-generation auto OEM ... In spite of an impressive set of products and early leadership in the field of vehicle electrification, we see Tesla share as overvalued. We believe the stock is not accounting for the risks and challenges inherent in Tesla's lofty growth ambitions." Fifth and finally was RBC Capital, which on Jan. 3 raised its price target slightly to $315 a share from $290. The firm reiterated its underperform rating, with the caveat that it does not see any negatives among the company's recent performance. "Post 4Q19 deliveries, we raise 2020-22 delivery forecast but believe the stock already discounts a very favorable future that requires near-perfect execution. That being said, we recognize Tesla is a thematic/momentum stock whose price can disconnect from fundamentals for periods of time. The bull narrative is strong and we see no immediate negative data point."

Analysts in the middle become wary

A pair of firms with hold ratings on Tesla's stock both issued warnings to clients last week. But while Baird significantly raised its Tesla price target to $525 a share from $355, Bernstein stuck by its $325 a share target. Baird advised investors to take profits after Tesla's recent stock run. "While we remain constructive on TSLA's long-term prospects, we now believe estimates are properly calibrated (particularly on the buy-side) and valuation appears more balanced. Admittedly battle-worn after a contentious two year period (reach out to hear our best stories) we will wait for further execution to get more positive on the name." Bernstein didn't budge with its estimates, saying that Tesla's fourth-quarter results have "the potential for weaker margins" while the first quarter may see "softness" after the elimination of subsidies in the U.S. and the Netherlands. "We have become incrementally cautious on the stock, given its huge recent surge in price." Deutsche Bank raised its price target to $455 a share for Tesla, still expecting to slip from its current highs. But the firm left room to the upside when explaining its mixed outlook. "Tesla truly seems to be firing on all cylinders currently ... but with the stock hovering around all-time highs, we worry investor sentiment has gotten bullish too fast, ignoring some of the nearer-term execution risks ... Ultimately, this year's profits and free cash flow will depend on how successful the company is in ramping up output at its new Shanghai facility, and how quickly Model Y can start production."

Optimists set the bar even higher