Wolfe Research expects a Tesla (NASDAQ: TSLA) "moonshot" in the coming weeks, leading to earnings per share of up to $40 in 2025. Tesla's business has already reached "escape velocity" so far, and therefore the company should be considered as the largest beneficiary of US electric vehicle legislation.
Wolfe Research analyst Rod Lache confirmed the Peerperform rating and the $675.00 price target for Tesla, but stressed that unexpected success could occur in the legislative pipeline that could make the Californian manufacturer very profitable.
Based on discussions with its industry representatives, Wolfe Research will not be surprised if there is a "moonshot" on electrification of cars in the near future, which aims to turn the US into a leader. This could drive the production of 10 million electric vehicles a year by 2030, or roughly 60% of new car sales in the United States.
"Based on discussions with our industry contacts, we would not be surprised to hear about a 'moonshot' for vehicle electrification over the next few weeks, aimed at shifting the U.S. from laggard to leader."
Lache stated that Tesla's business has now reached an “escape velocity.” In this regard, the company should be seen as the largest beneficiary of US electric vehicle legislation. He stressed that Wall Street could still overlook a number of new opportunities.
In his report, Lache focused on some of Tesla's capabilities that can make a very big contribution to profitability over the medium term. These include Semi-Autonomous (FSD) Subscriptions, Vehicle Service that should turn highly profitable, a burgeoning Insurance Business, the world's largest Fast Charging Network, and other Connected Car services. Considering all this, the firm believes that Tesla may reach about a $40 EPS by 2025.
"Tesla's EV business has already achieved 'escape velocity.' And we believe that this company may be viewed as the largest beneficiary of U.S. EV legislation. But perhaps most interestingly, we still believe that the Street may be overlooking a number of emerging opportunities. In this report we focus on a few that could become very large contributors to profitability over the intermediate term. These include Semi-Autonomous (FSD) Subscriptions, Vehicle Service that should turn highly profitable, a burgeoning Insurance Business, the world's largest Fast Charging Network, and other Connected Car services. We now believe that TSLA may reach ~$40 EPS by 2025."
How Lache got $40:
- $31 EPS from the company’s base Auto Business (including Semi)
- $6 from Feature Subscriptions (FSD & Connectivity)
- $4 from Vehicle Service
- $2 from Insurance
- $2 from the company's growing Energy business Partially offset by ~ ($ 7) from Opex/Interest
H/T Sawyer Merritt/Twitter
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Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.