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Stock Analysis: Analysts Get Bullish on Tesla

As Tesla stock prices breached US$500 for the first time in history this month, market analysts have become quite bullish on the company’s prospects. One money manager even predicts that Tesla is going to hit US$6000 per share.

Bullish view

Colin Rusch of Oppenheimer raised his Tesla price target to US$612 and gave the stock an “outperforming” rating. He sees Tesla as a “must-own” stock that can benefit from being included in additional indexes. The price target of US$612 was fixed based on a 30x multiple of projected non-GAAP earnings per share of US$28.67 in 2024, discounted at 12 percent for three years.

“[While Tesla has] stumbled through growing pains, we believe the company has reached critical scale sufficient to support sustainable positive FCF… the company’s risk tolerance, ability to implement learnings from past errors, and larger ambition than peers are beginning to pose an existential threat to transportation companies that are unable or unwilling to innovate at a faster pace,” he wrote in a note (Business Insider).

Emmanuel Rosner of Deutsche Bank wrote in a recent note that Tesla was “firing on all cylinders.” He sees the construction of a factory in Europe, production in China, and the boost in regulatory credit revenue as positives. Philippe Houchois of Jefferies warned that it would be wrong to exit Tesla at current valuation since it is the only original equipment manufacturer that is engaged in a positive-sum game in the electric vehicle industry. He also expects the auto business to become profitable this year and believes that de-risking the balance sheet would provide opportunities for growth.

With the construction of a factory in Europe and production in China, analysts are saying that Tesla is firing on all cylinders. (Image: Screenshot / YouTube)

The most surprising prediction came from Catherine Wood, founder of Ark Investment, who said that Tesla’s share price was going to breach US$6000 within the next five years. Her calculation is based on the assumption that the company would continue its dominance in the EV market during this period. She is also positive that Tesla will do well in the growing autonomous vehicle sector.

Wood reasons that: “Tesla is positioned to be the dominant player in that emerging technology space because its fleet of existing vehicles — almost 700,000 of them, she said — are already collecting data… Tesla developing and deploying a fleet of autonomous taxis could yield software as a service type margins around 80 percent, which she argues could support a stock price around [US]$6,000,” according to CNBC.

The new battery

An important part of Tesla’s aim to become an EV giant is batteries. Though the batteries currently available in the market are good enough for normal trips in cars, they fall short when it comes to large vehicles like long haul trucks or even continuous car services. For instance, Tesla’s top battery provides a range of 370 miles on a single charge and has a lifespan of 300,000 to 500,000 miles, which is good enough for a regular car owner.

(Image: Screenshot / YouTube)
Tesla plans to launch a new battery that is suitable for long haul trucks or continuous service cars. (Image: Screenshot / YouTube)

However, a trucker travels at least 2,000 to 3,000 miles per week and 100,000 to 150,000 miles per year. To cater to such needs, Tesla plans to launch its “million-mile battery,” which is expected to last for 1,000,000 miles. Tesla’s new battery “claims to boost efficiency, energy density, and longevity at reduced costs relative to current Li-Ion batteries. It’s an upgrade of existing NMC (lithium nickel manganese cobalt oxide) battery chemistry that Tesla utilizes in its stationary energy storage systems, but not in its vehicle fleet (that would be lithium nickel cobalt aluminum oxide, or NCA-type batteries),” according to Forbes.

If Tesla’s plans go as expected, the company could easily dominate the battery and EV industry. The longer battery life will likely create additional demand, which will help Tesla increase production, lower prices, and stimulate even more demand.

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