Tesla receives a $1 PT increase from RBC Capital: Report

Credit: Tesla North America | X

RBC Capital raised Tesla’s price target by $1 from $297 to $298 and maintained its Outperform rating, reported The Street.

RBC Capital analyst Tom Narayan included Tesla’s Megapack business in his price point estimate. RBC Capital sees potential in Tesla’s Megapack business, including $117 billion in extra value for the energy storage systems in the company’s valuation. 

Tesla Megapacks represent 11% of Tesla’s overall price point from RBC Capital, assuming it stays at a flat market share of 15% despite having a 30% cost advantage versus its peers. The investment bank also predicts 25% EBITDA margins despite decreasing battery costs. 

“Given conservatism embedded in our base case, we believe the [Megapack] business is probably worth between $100 to $200 billion.”

The investment bank’s upside scenario for Tesla’s Megapack business is a 20% market share and 30% EBITDA margins with a $212 billion valuation. 

RBC Capital has a conservative outlook for Tesla’s car business. It lowered Tesla’s Autonomy valuation due to reduced licensing penetration expectations. 

By 2035, the investment bank forecasts that Tesla will sell ~2.5 million vehicles per year in North America, ~800,000 in Western Europe, and ~1.7 million in China. It predicts that the Model 3 and Model Y will account for ~2.3 million units sold yearly, while the upcoming Model 2 will account for ~3 million per year at maturity. 

“Given our expectation that management’s goal is to increase volumes in order to sell autonomy, we have gross margins falling from 18% in 2023 to 11% by 2035

“This conservatively assumes Model 2 at breakeven despite management expecting the car to cost $20K to make and be priced at $25K (ex-$7,500 to the consumer for the IRA credit). We value Cars at $78B using a 2.5x mass market OEM multiple (up from 2.0x) on 2024E EBITDA. Lowering Licensing but Autonomy [is] still key. OEMs have been pulling back on organic investments, and ordinarily, this should be viewed constructively for FSD licensing,” noted the investment bank.  

Elon Musk discussed the state of Full Self-Driving licenses during the TSLA Q4 and Full Year 2023 earnings call. 

“I really think lots of car companies should be asking for FSD licenses. And we’ve has some tentative conversations, but I think they don’t believe it’s real quite yet,” said Musk. 

Meanwhile, Ford CEO Jim Farley advises people to stop looking at FSD and Tesla when it comes to the future of the automotive industry. 

If you have any tips, contact me at maria@teslarati.com or via X @Writer_01001101.

Maria Merano: Veteran writer and editor, who believes harmony between tech and nature is achievable. We just need to learn to compromise.
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