Jefferies analyst Philippe Houchois raised his price target for Tesla to $600 from $400 and keeps a Buy rating on the shares. The stock closed Monday up $46.71, or 10%, to $524.86. It would be wrong to exit Tesla on valuation, Houchois tells investors in a research note.
Tesla is the only car manufacturer engaged in a "positive-sum game" in electric vehicles amid rising market acceptance, and its auto business should turn profitable this year excluding tax credits, contends the analyst. Further, Houchois believes the company "balance sheet de-risking makes old and new growth opportunities viable, from battery tech to stationary and autonomy." The analyst, who boosted his price target after incorporating the company non-auto valuation drivers, also thinks consensus estimates for 2020 look "reasonable and conservative."
In a note to clients, Houchois said cashing in based on current valuation would be a mistake, given the company is likely to turn profitable this year - something many analysts including Jefferies weren't calling for even 12 months ago.
From the perspective of Jefferies analyst firm, Tesla benefits from a growing number of customers accepting emissions-free cars and should become profitable in 2020.
Also, according to Jefferies, Tesla can provide additional growth, especially in the field of storage and sale of batteries to third-party suppliers of original spare parts. “According to our estimates, by 2025 and 2030 these markets will cost approximately $90 billion and $235 billion, respectively, which could increase EBIT by $0.9 billion and $2.2 billion. The USA, respectively (market share/margin of 10%),” the expert writes. Huchua summarizes the expected revenue improvement and ever-increasing value added in the non-automotive sectors, reflecting its new price target.
Since the beginning of January, several analysts from leading firms have raised their target Tesla stock prices.
Argus Research analyst Bill Selesky raised his 12-month price target on Tesla to $556 from $396. Such an increase in prices, Selesky justified by the fact that Tesla achieved record production and supply of cars in the 4th quarter of 2019. The total supply in 2019 amounted to 367,500, and was 50% higher than in 2018. Selesky said:
"We are raising our 2020 EPS estimate to $5.96 from $4.40 to reflect improved economies of scale in 2020 production and delivery results and a better-than-expected ramp up of vehicles produced at the Shanghai factory in China. The 2020 consensus estimate is $5.58.
Our positive stance on the stock, which is up 40% over the past year versus 27% for the S&P 500, assumes ongoing revenue growth from the legacy Model S and Model X, as well as continued strong demand for the new Model 3. The recent (record) production and delivery performance for the fourth-quarter of 2019 highlight the popularity of the Model 3, which accounted for more than 80% of 4Q production."
Yesterday, Oppenheimer analyst Colin Rush raised Tesla's target stock price from $385 per share to $612 per share. He claims the company has reached a “critical scale” to support sustainable free cash flows. He also suggests that a company could also pose an “existential threat” to transport companies that have no ambition or ability to innovate at the fast pace of Tesla.
Analyst believes Tesla has "key advantages" over its competitors in powertrain design and battery technology, ADAS fleet size, roadmap to energy independence and consumer enthusiasm. Rush said:
"We believe Tesla's powertrain technology, power / data architecture, and operating system are tracking ~ three years ahead of competition based on available vehicles and checks on new platforms," Rusch said. "Given the resolution of manufacturing bottlenecks and demonstration of strong consumer demand, we believe TSLA is becoming a must-own stock and could benefit from inclusion in additional indexes."
The company's market capitalization is now $95 billion, roughly $8 billion more than General Motors and Ford combined.
Featured image: Isabelle OHara/Shutterstock
Follow me on Twitter Eva Fox 🦊
About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.