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Tesla (TSLA) has 50-70% five-year upside because of tech lead, Wall Street firm says

(Photo: Tesla)

Tesla’s (NASDAQ: TSLA) potential within the next 4 to 5 years shows an upside of between 50% and 70% because of an extensive lead in vehicle technology.

Oppenheimer’s Colin Rusch appeared on CNBC’s Squawk Box on Thursday to talk about the electric automaker’s outlook for the future, which he believes is exceptionally positive considering the lead Tesla holds in software, technology, and industry focus.

Rusch and Oppenheimer’s price target for TSLA was at $968. Still, the analyst admits the company’s growth has blown past his firm’s targets because of technological advantages and a focus on one type of vehicle.

“It’s run aggressively past our price target, which was $968. We put that in place over a quarter ago, and as we look at what the company has planned out to 2024 and 2025, we see the potential for 50 to 70 percent upside to our unit numbers,” Rusch said.

TSLA stock has surged 46% in one month, reaching highs on five consecutive trading days from July 1 to July 5. The company exceeded Wall Street expectations with 90,650 total units delivered in the second quarter of the year.

Oppenheimer is looking to see what Tesla’s gross margin number when the company’s Q2 2020 Earnings Call takes place on July 22.

“This company has an exceptional amount of leverage in the model at the manufacturing level, so they’re continuing to drive gross margins higher and benefit from the efficiency in Shanghai,” Rusch added. “There is some significant earnings power still left to be had here.”

Tesla’s distinct advantages in growth also come from the company’s primary focus on manufacturing purely electric vehicles. This is an advantage that other automakers simply do not have. While many large automakers are trying to transition to at least a partial electric fleet of vehicles, they are still primarily focused on manufacturing combustion engine vehicles.

This ends up splitting the concentration away from electrification, and companies spend less time developing software and technology that would advance the performance of an electric fleet.

Tesla spends 100% of its time developing and manufacturing electric vehicles, which will eventually become a mainstream form of transportation in the future. This gives the Silicon Valley-based electric car maker a distinct advantage in terms of performance, range, and battery technology.

Rusch indicates that Tesla’s upside potential within the next few years is so astronomical because the automotive industry continues to push toward electrification. In a few years, many large automakers will have 10-20 electric cars, but Tesla’s vehicles will be preferrable among car buyers because of advanced technology and performance.

“As we look across the industry and we get some of those competitive companies, they just continue to lag in terms of the products that they’re bringing the market,” Rusch said. “The functionality to the Over-the-Air updates, and operating system, and it continues to look like Tesla has the two to three year lead from a technology perspective.”

At the time of writing, TSLA stock was up .52%, trading at 1,372.98.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla (TSLA) has 50-70% five-year upside because of tech lead, Wall Street firm says
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