Wedbush analyst Daniel Ives has set a price target for Tesla (NASDAQ: TSLA) shares at $475. According to Ives, Giga Shanghai is at the core of the company's Q3 2020 success.

The firm says Tesla is poised to win in Q3 2020 as deliveries are likely to reach over 140,000. Such numbers could lead to a robust finish to the quarter, possibly placing the bottom-line EPS within the range of $0.55 - $0.60, the analyst wrote.

Such results would be commendable, as they would have been achieved despite a soft macro backdrop, with competitors across the board struggling to meet expectations. “One other main feather within the cap for Musk & Co. on this gentle macro backdrop with rivals throughout the board struggling to hit numbers,” notes Ives.

He writes that the quarter's strength lies in the huge underlying demand in China, especially for Model 3 vehicles. Despite a large number of competitors, demand for the China-made Model 3 continues to grow.

“The clear standout this quarter but once more is the large underlying demand popping out of China as now we have seen demand surge in China for Mannequin 3’s on this key area with Giga 3 firing on all cylinders heading into year-end.”

Ives also factors in the benefits on the horizon for Giga Shanghai. In addition to price cuts stimulating demand, the macro environmental factors should improve over time, in particular as global lockdowns ease.

Model 3’s production figures will soon reach 150,000 units in the first year after the launch of Giga Shanghai, the analyst said. Ives also points out that Model Y deliveries will begin to grow in Q4.

With margins on Model 3s sold in China being higher relative to the U.S. and Europe, China could also markedly increase Tesla's profitability profile over the next few years, the firm writes.

© 2020, Eva Fox. All rights reserved.

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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.