Two prominent Wall Street analysts have raised their price targets for electric vehicle manufacturer Tesla (TSLA).
Morgan Stanley analyst Adam Jonas increased his most optimistic Tesla forecast to $1,200 per share from $650. He also raised his average target price for stocks from $360 to $500 per share. Jonas cited Tesla’s potential to become a battery supplier as an argument for adjusting his target price. He also reiterated his aggressive suggestion that Tesla might own 30% of the global electric car market in the future. This includes 4 million deliveries by 2030, plus Tesla could potentially become a supplier of powertrains and batteries.
"Our new bull case reflects 4 million units of auto volume by 2030 with a 12% operating margin. This compares with our base case forecast of 2.2 million units and a 10% OP margin by 2030. Additionally, we have included $ 168 / share of value for the company potential to supply EV powertrains (battery + e-motors and supporting 'skateboard' architecture) to other OEMs on a 3rd party supply basis. The combined 6 million units of EVs we assume in our Tesla bull case accounts for roughly 30 % of the global EV market (on Morgan Stanley forecasts), which we believe is an aggressive assumption. Our bull case also includes just over $ 100 / share of mobility services and energy / SCTY value. The shares offer roughly 50% potential upside to our bull case."
In addition, Sanford C Bernstein analyst Toni Sacconaghi raised his target price to $730 from $325, while maintaining a Market Perform rating, noting that investors are feeling much better about Tesla's ability to be consistently profitable, which requires a new valuation methodology. The analyst also noted that Tesla's demand for Model 3 remained stable, gross margin and operating expenses were ready for significant improvement, the competition was pompous, product and production pipelines were robust.
"Importantly, Tesla is the ultimate" possibility "stock - after all, its core addressable market is likely to grow over 30x over the next 20 years, meaning that even if its current share gets cut by 50%, it will still grow 15x during the period (a CAGR of 15% for 20 years!) + it has significant addition optionality (truck market; self-driving; battery technology; solar, etc.) We are skeptical that upside possibilities are likely to be expunged any time soon - suggesting no imminent negative catalysts for the stock."
TSLA shares rose by 91% in 2020, which is explained by good results, a short squeeze, and the opening of a new factory in China. The huge potential of the company prompted Jonas and Sacconaghi to raise stock forecasts. Tesla shares have resumed their steep rise today.
At the time of writing, Tesla shares were trading at $ 859.07 per share.
I don't own Tesla shares and don't intend to buy them within 72 hours. The article is provided for informational purposes and doesn't constitute a call to action.