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Credit Suisse has reiterated its Tesla (NASDAQ: TSLA) $1,125 price target and is convinced that the company's long-term opportunity remains intact. The firm believes that buying the stock is an attractive proposition now, with an upside potential of almost 60%.
Credit Suisse analyst Dan Levy reaffirmed Tesla Outperform rating despite the recent drop in share price. While it may have spooked some investors, the seasoned analyst sees it as a big opportunity. Levy's reiterated price target for TSLA is $1,125.00 per share, suggesting an upside potential of nearly 60% from current levels.
The analyst wrote about his confidence in the manufacturer's performance after he visited Tesla's Fremont factory. There he had the opportunity to see the current progress, as well as talk with the IR team. They discussed China's current policy regarding COVID-19 and its impact on the performance of Giga Shanghai.
“During our visit, we discussed how ZQ has played out to date in China. Mgmt noted that Shanghai saw a full month of shutdowns, the majority coming in April. Since the 1Q call, Shanghai has operated with one shift, and mgmt notes that for Tesla to produce at two shifts with meaningful volume, Tesla’s China suppliers will also need to resume production,” Levy said in a client note.
After the Fremont factory's visit, the analyst predicts that deliveries in Q2 2022 will be about 240,000 - 250,000 units. This is 45,000 - 55,000 below the firm's previous estimate of 295,000 units. It is also below the 310,048 delivered in Q1 2022. Despite this temporary decline in production due to the lockdown in China, which closed Giga Shanghai for three weeks, Levy is convinced that the long-term opportunity for Tesla remains intact. The manufacturer is focused on ramping up production at new factories in Berlin and Austin, as well as in Shanghai. Meanwhile, the Fremont factory has demonstrated continuous production and continuous improvement.
“While Tesla's production is focused on its new gigafactories (Shanghai, Berlin, Austin), the visit reminded us that Fremont has demonstrated continuous manufacturing kaizen. In terms of inventories, we expect the short term (2Q in particular) to reflect some regression in terms of margins and overall deliveries driven by production issues in Shanghai,” the analyst concluded.
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