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Ahead of announcing Q4 2020 financial results, Jefferies is raising its Tesla (NASDAQ: TSLA) price target to $775 from $650, and keeps a Hold rating, seeing a Tesla Q4 GAAP EBIT of $930M.

Jefferies analyst Philippe Houchois raised the firm's price target on Tesla, and keeps a Hold rating on the shares, as after the close of TSLA trading on January 27, the company will release Q4 2020 financial results, which the firm expects to be good. Houchois wrote that, although deliveries last quarter were slightly lower than he estimated, the firm raises auto gross margin (ex ZEV) 50bps to 22.2% on a favorable mix of product and production. Based on this, Jefferies sees 4Q GAAP EBIT of $930M.

"We raise our Tesla earnings forecast and price target ahead of 4Q results on 1/27. Despite deliveries falling slightly short of our estimate, we raise auto gross margin (ex ZEV) 50bps to 22.2% on a favorable mix of product and production. On our higher gross margin assumption, we see 4Q GAAP EBIT of $ 930M. In addition, we now model 2021E volume of 805k units (+ 60%) with revenue of $47.8B and GAAP EBIT of $4.1B."

Houchois wrote that "throughout 2020, the re-rating of Tesla, effectively created the positive long- term or terminal value that traditional OEMs have been denied for years." He stressed that "while the transition to electrification is by and large a zero-sum-game of substitution, it could rapidly become a negative-sum-game for traditional OEMs if they let too many new entrants, either Chinese challengers or SPAC upstarts, gain viable share."

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