Tesla shares (NASDAQ:TSLA) have seen a meteoric rise recently, propelled by the company’s stellar second quarter delivery numbers. On Monday alone, Tesla stock rose a further 13.48%, ending the day at $1371.58 per share. That’s mighty impressive for a company that, just a year ago, was trading as low as $211 per share.
Amidst TSLA’s recent rise, JMP Securities analyst Joe Osha posted a bullish update on the electric car maker, stating that the company’s stock could reach $1,500 per share, a Wall Street high. In a note to clients, Osha explained that if Tesla can deliver over 90,000 vehicles in a quarter where its operations were severely disrupted by the coronavirus, there is no stopping the company from delivering over 120,000 vehicles per quarter by the end of 2020. This could put the company on track to deliver over 750,000 vehicles in 2021.
“If the company can manage 90K units during an extraordinarily challenging quarter, there is no reason that TSLA cannot be shipping 130K to 140K units a quarter by the end of the year in our opinion. That puts TSLA on a trajectory to ship 757K units in 2021,” the JMP Securities analyst wrote.
With Tesla’s ongoing growth in mind, and with demand for vehicles like the Model 3 and Model Y remaining healthy, Osha sees the company potentially reaching $100 billion in revenue in 2025. By this time, the JMP Securities analyst expects Tesla to deliver as many as 2.5 million vehicles per year, and have an EBITDA margin of 20%. This, according to the analyst, could effectively make Tesla into a “category killer.”
“We believe that TSLA is a category killer that is still early in the process of building a dominant position in electric vehicles, and the stock needs to be valued in comparison to other similarly successful companies,” the analyst noted.
Tesla’s second quarter results indicated that the electric car maker was able to deliver 90,650 vehicles between April and June, far above Wall Street’s consensus of 72,000 deliveries. This was despite the Fremont plant being closed for almost seven weeks due to the pandemic. The results, if any, showed two very notable points: one, it showed that Tesla’s Gigafactory Shanghai is becoming a significant contributor to the company’s numbers; and two, demand for Tesla’s electric cars like the Model 3 and Model Y are healthy.
Tesla bears would argue that the electric car maker’s Q2 2020 deliveries are 5% lower than the company’s Q2 2019 numbers. What critics are forgetting is that there is an ongoing pandemic today, which has ravaged the auto industry as a whole. In fact, while Tesla’s deliveries have declined 5% year over year in Q2 2020, other automakers have shown much more significant drops. General Motors, for example, reported a drop of 34%, Fiat Chrysler took a 39% hit, and Toyota showed a decline of 35% year over year.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
