Recent news about Tesla stock (NASDAQ:TSLA) have mostly been focused on the recent downgrades it received from Wall St, but amidst analysts’ more cautious stance on the company, the electric car maker actually received a 30% higher price target from Piper Sandler. The firm noted that its more optimistic outlook was due to the potential of Tesla in China.
In a recent note to clients, Piper analyst Alexander Potter stated that the Made-in-China Model 3 could end up being successful. Provided that the Model 3’s market share in the United States can be replicated in China, the all-electric sedan could help Tesla boost its delivery volumes to record levels.
“Bottom line: If Tesla’s Model 3 market share in the United States can be replicated in China — and if this logic extends also to Model Y — then Tesla’s annual volume in China alone would eventually exceed 650k units,” Potter wrote.
For its potential in the world’s largest auto market, the Piper analyst has given Tesla a target price of $553 per share, a large jump from its previous target of $423. That’s a boost of over 30%, making the firm one of Tesla’s biggest bulls as of writing.
While Potter’s expectations in China appear to be extremely ambitious for now, it should be noted that Tesla appears to be in very good graces with the country’s government. This has been true since the electric car maker was still in the planning stages of Gigafactory 3, with the company receiving favorable treatment from regulators. Tesla even got low-interest loans from local banks to fund the initial construction of the Shanghai-based facility.
The construction of Gigafactory 3’s Phase 1 zone was completed in record time, and by December 30, less than a year since the factory broke ground, Tesla delivered the first Made-in-China Model 3 to employees. Actual customer deliveries started earlier this week, with Elon Musk flying over to Shanghai and handing over Model 3 sedans to local customers. Musk appeared to be in high spirits during his visit, at one point even dancing on stage.
Musk’s visit also marked the start of China’s Model Y program. Tesla expects the all-electric crossover to outsell the Model S, 3, and X on its own. With the Model Y saturating the local Chinese EV market, Piper Sandler’s ambitious annual estimates for China may very well end up being realistic after all.
As of writing, Tesla stock is trading -0.31% at $479.86 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.