Tesla Finally Gets An 'Outperform' Rating From Long-Term Bull Wedbush, With A Higher Price Target

Tesla Inc TSLA analyst Daniel Ives has upgraded his rating on the company for the first time to Outperform and added the automaker to his top picks.

The Tesla Analyst: Ives upgraded the company to Outperform from Neutral and upped the price target from $950 to $1,000. Ives has a long-term bull case target of $1,300 on Tesla. 

The Tesla Thesis: Ives said that the delivery numbers released on Friday are a “paradigm changer” and indicate that there is a “pent-up demand” worldwide for Tesla’s Model 3/Y vehicles, which is hitting the next stage of growth amid a “green tidal wave.”

The analyst wrote in a note issued Sunday that Tesla could exceed 850,000 deliveries for the year and there is a 900,000 stretch goal in place despite the ongoing chip shortage and supply chain issues plaguing the auto sector as a whole.

Ives said that the “eye popping” delivery numbers out of China cannot be ignored. He said there is a trajectory in the pace that indicates that the Elon Musk-led company’s nearly 40% deliveries could be in China by 2022.

See also: How to Invest in Tesla Stock

“We believe Tesla's profitability/FCF [Free Cash Profile] profile significantly improves over the next 3 to 4 years with $20 of annual EPS potential by 2026 based on our projection,” wrote Ives. 

Factors that led Wedbush to revise its price target and rating include the possible removal of the domestic EV tax credit ceiling which the automaker has already reached. The analyst expects this removal to come as part of the broader $2.3 trillion Biden infrastructure plan. He believes that the tax credit could potentially rise to a nearly $10,000 credit in order to bolster demand for EVs.

The analyst said that the first quarter delivery “drop the mic” numbers which total 184,800 vehicles were well ahead of estimates and defied skeptics and bears. He said the strength in the quarter was led by Model 3/Y which was a “jaw dropped” at 182,780 units. 

The strength enjoyed by Tesla in Europe and China puts Tesla on a trajectory to exceed 850,000 unit deliveries for the year, as per Wedbush.

“With 3% of auto sales EV today globally and on a trajectory to be 10% by 2025, we believe the EV market is just starting to play out as the auto sector is transformed green over the coming years with Tesla leading the charge,” wrote Ives.

The analyst also pointed to strong Nio Inc NIO and Xpeng Inc XPEV numbers as an indicator that the global EV demand is skyrocketing. 

Price Action: Tesla shares closed 0.93% lower at $661.75 on Thursday.

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