Betting against Tesla (NASDAQ: TSLA) seems almost pointless for now, Jefferies says, and raises the price target to $650 from $500.

The analyst firm writes that OEMs are acting in a way that requires caution while Tesla remains in a league of its own. Tesla and other electric vehicle startups "have built-up the terminal value and access to capital OEMs have been denied for years."

Rapid progress in reducing the cost of batteries (Tesla + GM point to $60-70/Kwh mid-decade), and rapidly spreading bans on the use of ICE around the world "take us closer to a BEV S curve adoption," writes Jefferies.
"The industry may be changing for the better with less complexity but low entry costs and lower thresholds for BEV scale may slow consolidation."

The firm writes in the note that capital expenditures peaked when OEMs started diverting capital from ICE, but there is no differentiation in their transition strategies.

Tesla is in a league of its own, though the firm has downgraded the stock to Hold while raising its price target to $650 from $500. Jefferies wrote, "We don't believe Tesla can dominate Autos given industry structure and politics, but multiple challenges to the auto business model (EVs, batteries, software, autonomy, design-to-manufacture and direct selling) ensure a durable competitive edge, with a “messianic” brand reaching far beyond autos. We raise 2021/22 EBIT estimates + 48/25% and PT $150 to $650."

The firm wrote that it sees 2021 as a year in which Tesla's growth and profits will accelerate as two highly unified vehicles are introduced, but investment in capacity and batteries will also accelerate.

This assessment shows that the firm continues to evaluate Tesla only as an automobile company, regardless of the fact that it is developing and is successful in many other areas. Despite the downgrade, a Jefferies analyst is increasing the price target for the next twelve months for Tesla from $500 to $650.

© 2020, Eva Fox. All rights reserved.

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