Why Tesla 'Appears To Be Turning The Corner' Heading Into Summer

Tesla Inc TSLA shares have ticked higher over the past month and one analyst says mthe company appears to be turning the corner now that its Fremont plant is back up and running.

The Tesla Analyst

Wedbush analyst Daniel Ives reiterated his Neutral rating for Tesla's stock and raised his price target from $600 to $800.

The Tesla Thesis

Ives said a resolution to the stand-off between Tesla CEO Elon Musk and Alameda County, California has eliminated near-term uncertainty for Tesla investors, and concerns over both demand and production appear to be dissipating.

Ives said demand in China appears to be strong, and the company seems to be on track to hit 100,000 unit deliveries in the first year of China gigafactory production. Ives has lowered his 2020 total vehicle delivery target for Tesla from 550,000 vehicles to 400,000 vehicles. The new target would represent about 9% growth compared to 2019.

Ives values China at around $300 per Tesla share but said the key to more upside for the stock from current levels will be profitability.

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“Fundamentally speaking the stock is currently being valued off how quickly Musk & Co. can hit the $20 in earnings power with the Street actively trying to quantify the ramp of the China EV growth opportunity which has naturally taken a near-term hit over the last few months given the coronavirus impact,” Ives wrote in a Wednesday note.

In 2019, Tesla reported an adjusted EPS loss of $4.92, but it has been profitable for the past three quarters.

On Wednesday, Tesla reportedly cut prices in both the US and China in response to slumping second-quarter demand.

Benzinga’s Take

Ives seems very bullish on Tesla’s growth outlook, yet his updated 12-month price target is below Tesla’s current share price. During the roughly two months Tesla’s production in Fremont was shut down completely, Tesla shares rallied more than 80%.

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