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CFRA analyst Garrett Nelson raised Tesla's (NASDAQ: TSLA) price target to $650 per share from $550, highlighting that the stock will be aided by the robust tailwind of index fund buying, the company's value of capital continues to rise steadily compared to peers, and electric vehicles will benefit greatly from Biden's administration.
“We increase our 12-month price target by $100 to $650, implying a ‘22 P/E of 113x. Our adjusted EPS estimates remain $2.30 for '20, $3.50 for '21, and $5.75 for '22."
In the note, Nelson wrote that Tesla's positive dynamic is likely to continue in the near future, which will be facilitated by several factors. First, the robust tailwind of index fund buying. Second, and crucially, Tesla is advantaged in its cost of capital when compared to its peers. The company continues to build new factories and strives to increase its annual car production, which will ultimately increase 40 times over the next decade.
“We think TSLA’s positive momentum is likely to continue in the near term, aided by the robust tailwind of index buying fund. Importantly, the ongoing run-up means that TSLA's cost of capital advantage relative to peers continues to widen, which is critical as the company continues to build new factories and deliver on its goal of increasing annual auto volumes by 40x over the next decade (from ~ 500K units this year to 20M by 2030)."
Another big factor is that electric vehicles will get a positive boost thanks to the Biden administration. They are expected to receive subsidies from the proposed expansion of tax breaks, consumer rebates, and widespread construction of charging stations across the United States.
"In our view, TSLA shares are also benefiting from expectations that EVs will be heavily subsidized under a Biden administration, through the proposed expansion of tax credits, consumer rebates, and aggressive nationwide charging station build-out."
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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.