Investor's Corner

Top Wall St analyst sees Tesla’s (TSLA) trillion-dollar potential, raises $1.2k price target

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Piper Sandler analyst Alexander Potter, a top-ranked Wall Street analyst, has raised his price target for Tesla stock (NASDAQ:TSLA) to a “Street High” of $1,200 per share, up from his previous estimate of $515 per share. Potter also maintained his “Overweight” rating for the stock. 

In an extensive research note that spanned over a hundred pages, Potter outlined Tesla’s potential, highlighting that the electric car maker is taking on trillion-dollar industries. What is rather remarkable is that despite Piper Sandler’s undoubtedly optimistic stance on TSLA stock, the firm’s estimates are still conservative relative to the electric car maker’s self-imposed targets. 

“Some may scoff at our generous assumptions re: TSLA’s long-term potential, but consider this: our model does not contemplate Tesla’s eventual entry into the HVAC or auto insurance markets, both of which represent hundreds of billions in market-wide revenue. Our forecast of peak vehicle production (9M units/year) is also materially below Tesla’s own ambitions, based on capacity plans outlined at Battery Day. Plus we could be under-modeling Tesla’s solar revenue, as well as “Autobidder” and other opportunities in the Energy segment (these businesses are still nascent),” Potter wrote in his research. 

Interestingly enough, Piper Sandler’s research covered and acknowledged Tesla’s multiple businesses and opportunities, such as its energy and battery projects. This is rather remarkable considering that Wall Street, for the most part, has largely ignored Tesla’s efforts save for its electric car business. The analyst even mentioned the value of Tesla’s strong brand, which needs no ads to capture the market’s attention. More importantly, the firm also recognized that Tesla’s momentum may very well result in the EV maker seeing sustained success. 

“Our forecast implies 894k vehicle deliveries in 2021, eventually ramping to 9M+ units in 2030. Note that this level of production would rank TSLA among the top-3 auto makers globally. More important still, we anticipate a steady ramp in full self-driving (FSD) software adoption starting in 2030, with 50%+ of all Tesla owners using the FSD package by the end of our forecast period. This should have a big impact on margins, with EBIT margin eventually exceeding 40%. Finally, by the 2030s, we expect Tesla Energy to represent 20%-30% of revenue (vs. ~6% today). Taken together, these changes drive our DCF-based price target up to $1,200 (vs. $515 previously),” the analyst wrote. 

Ultimately, the Piper Sandler analyst noted that while Tesla’s 2020 was one for the books, the “fireworks” for the company are nowhere near over. “2020 was a breakout year for TSLA, but in our view, the fireworks aren’t over. Even after a 10x return over the past 12 months, we don’t think investors should be selling this stock,” Potter wrote. 

Disclaimer: I am long TSLA.

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Top Wall St analyst sees Tesla’s (TSLA) trillion-dollar potential, raises $1.2k price target
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