Tesla Corp. (NASDAQ:TSLA) has been upgraded by Canaccord Genuity to ‘buy’ from ‘hold’ after the Canadian broker boosted its share target price for the electric vehicles (EVs) maker to US$1,071.00 from US$419.00,. with the stock currently trading at close to US$700 per share.
In a note to clients, Canaccord Genuity‘s analysts said the increased target price was based on a valuation of 63 times their 2024 EV/EBITDA multiple for Tesla, which is three times the peer group average.
“While rich, we also believe Tesla holds a several-year lead and is now expanding aggressively into storage and thus feel our multiple is warranted,” they added.
The analysts said they believe that Tesla’s focus on first-principle engineering will radically change the battery market, enabling the company to further the lead in battery EVs (BEV) and expand into the solar and home energy markets with its Powerwall products.
They pointed out that battery supply constraints will begin to alleviate in 2022, as the new 4680 cell design production comes online in Giga Nevada, Texas, and in Berlin, and with its partners Panasonic and LG, adding that ample battery supply will allow Tesla to meet its new aggressive Powerwall campaign, as well as Powerpack, and Megapack in full scale, often paired with solar installations.
The analysts said: “We are expecting accelerated growth in the energy generation and storage business, growing conservatively to $8B in revenue in ’25 with gross margins at parity or better than its BEV business (+25%). Model 3/Y represented 99% of TSLA’s record 1Q21 deliveries, demonstrating a successful transition to the leader in mass-market BEVs.”
They added: “We believe auto gross margins will continue to improve to 25%+ as Model 3/Y volumes increase from Giga Shanghai and entry models using LFP batteries, and tail wind from credit sales in China.”
The analysts noted that Tesla’s new battery innovations in manufacturing, cell design, and auto structural integration will reduce $/kWh by 30%, further widening the gap, and the company’s lead over
They said: “TSLA’s successful transition to mass-market EVs and strong investments in battery manufacturing expertise and production capacity give us confidence they will attack and conquer another trillion-dollar market in energy generation and storage.”
The analysts concluded: “Our data suggests Tesla has ramped home energy generation and storage campaigns already, building demand and leveraging its brand.”
In midday trading on Monday, Tesla shares in New York were trading at US$696.24, up 19% on the day so far.
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