Tesla is a controversial stock. That means investors need to sharpen their pencils and try to understand what analysts are sayingbecause when controversy is high, the Wall Street consensus doesnt mean anything.

There are a number of ways to quantify a controversial stock. One way is to look at analyst price targets. For Tesla (ticker: TSLA), target prices vary widely. The top analyst price target for the stock is now $2,322, set by Piper Sandler analyst Alex Potter Tuesday. One of the lowest from major brokers comes from Cowen analyst Jeffery Osborne. His target price is just $300 a share.

The $2,022 bull-bear spread is about 133% of Tesla stocks current level. Thats roughly three times the average bull-bear spread for Dow Jones Industrial Average stocks. Yep, Tesla is controversial.

Potter uses a discounted-cash-flow, or DCF, model to arrive at his price target. A DCF is typically a detailed financial model that forecasts sales, profit margins, and interest rates. Its a very useful tool for financial analysts, but, as is the case with any model, the more assumptions that go into it, the greater the chance for error.

When updating his target price Tuesday, Potter increased his profit-margin expectations because of Teslas lead in software technology. Tesla, for instance, sells software-derived vehicle features for thousands of dollars. He also increased his vehicle delivery assumptions.

(Potters target generated a Wow tweet from CEO Elon Musk.)

Osbornes primary valuation metrics are price/earnings and price/ earnings growth, or PEG, ratios. A PEG ratio is useful for comparing valuation of other high-growth companies. It divides the PE ratio by the earnings growth rate. Tesla is growing fast, but Osborne believes the stock is still overvalued.

Potter rates shares the equivalent of Buy. Osbornes rating is Sell. J.P. Morgans Ryan Brinkman, Barclays Brian Johnson, Morgan Stanleys Adam Jonas, and RBCs Joseph Spak also rate shares the equivalent of Sell.

Brinkman has a $295 price target, just a hair below Osbornes. He derives his price target based on fundamentals alone, blending his DCF value and 2021 earnings multiples.

Brian Johnson also has a $300 target price. He calls Teslas business execution impressive but its shares overvalued. He uses a probabilistic framework, meaning he blends several scenarios to come up with a target price. Interestingly, he publishes an upside and downside case for the stock. His upside target is $1,925 a share, but his downside number is $36.

Adam Jonas is a bear, but less bearish than Osborne, Brinkman, and Johnson. His price target is $740. He values the components of Tesla separately. The car business, for Jonas, is worth $703 a share based on Ebtida multiples. He values Teslas potential mobility businesssuch as autonomous taxisat $37 a share. He values Teslas solar panel and energy storage business at zero.

Joseph Spak has a $615 price target. His method is a little different than other analysts. He uses a three times 2021 sales multiple and 18 times 2021 Ebitda (earnings before interest, taxes, depreciation, and amortization) multiple and adjusts his target for bull and bear scenarios.

There are so many ways to arrive at value. Those are the bears, Ben Kallo and Dan Ives are two Hold-rated analysts. Kallo has a $700 price target based on a 15 times 2022 Ebitda estimatein line with other large-cap high-growth peers, he writes. He was bullish on Tesla stock for a long time, but downgraded shares in 2020 after the risk-reward became more fairly balanced.

Ives, for his part, has a $1,250 price target and values Tesla stock at 42 times his 2025 estimated earnings of $30 a share. Wall Streets 2023 earnings estimate, by comparison, is roughly $24 a share.

Jefferies Philppe Houchois and JMP Securities Joe Osha are two more bullish analysts. Oshas price target is $1,500. He values Tesla like other category killers, including Apple (AAPL). That leads him to higher market-share and profit-margin assumptions than traditional auto makers have achieved.

Houchois price target is $1,200. Like Potters, it is DCF derived. It is the first true valuation repeat among Barrons sample. Still, assumption differences drive a $1,122 price difference. Thats $200 billion of market value.

Thats how 10 analysts arrived at a value for Tesla shares. Thirty-six analysts cover the company, according to Bloomberg. The average analyst price target now sits a little below $900.

Thats well below where shares trade, but its hard to keep up. Tesla stock has risen 268% year to date, crushing comparable returns of the Dow and S&P 500. Tesla is now the worlds most valuable car company.

Tesla stock was down 0.8%, at $1,504.41, in early trading. The stock closed up $29.21, or 1.9%, at $1546.01. The S&P 500 rose 0.9%.

Write to Al Root at allen.root@dowjones.com

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Is Tesla Worth $2322 or $300? How 10 Analysts See the Stock. - Barron's