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Piper Sandler sees Tesla stock rising to $280 per share over the next 12 months. The valuation is based on Tesla's ability to fund its own business and increase the size of earnings thanks to high-margin software sales.

Tesla stock is up nearly 40 percent since the beginning of the year. Still, a Piper Sandler analyst thinks the stock has room to grow. Alex Potter has set a 12-month price target for the stock at $280. This suggests more than a 60 percent upside from today's level.

Some analysts have recently significantly lowered their price targets for Tesla. They did so based on concerns about the company's lower earnings because of its aggressive car price cuts this year. Piper Sandler also lowered its valuation from $300 a share to $280 a share. This reflects its underestimation of the company's financial performance from 2023 to 2025, as Tesla operates with the short-term impact of lower prices and demand risks in an uncertain macroeconomic environment.

Nevertheless, despite the decline, the $280 price target is very positive. Potter's bullish argument includes praise for Tesla's ability to finance its own business through strong free cash flow and the expectation that earnings will eventually increase again thanks to high-margin software sales. Right now, Enhanced Autopilot costs $6,000, and the company's more advanced driver assistance technology, FSD, costs $15,000. Tesla expects the software to become much more advanced soon, which will ensure a growing customer base and, consequently, profits. Potter also shares this view. In his opinion, the software can open up huge profits.

During the Q1 2023 Earnings Call, Tesla CEO Elon Musk said he believes the company will reach full self-driving capability this year. That will help the company make huge profits.

“We're the only ones making cars that -- technically -- we could sell for zero profit for now and then yield actually tremendous economics in the future through autonomy.”

© 2023, Eva Fox | Tesmanian. All rights reserved.

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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

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.