American’s economy may be a wreck, but with Tesla (TSLA) shares up more than 500% in 2020, investors have nothing to complain about.
Now, one analyst argues that, in best case scenario, TSLA could hit $1,000 a share by the end of 2021, as demand for electric vehicles “inflects” on a global scale.
Indeed, according to Wedbush analyst Daniel Ives, now that Tesla has enjoyed the windfall from its long-awaited incorporation into the S&P 500 (an event that forced funds and ETFs that track the S&P to buy the stock regardless of price), “the Tesla bull story is now all about a stepped up EV demand,” as Tesla drives towards 1 million deliveries in 2023 — or even as early as 2022 (emphasis added).
Now how does Tesla do that?
Currently, electric vehicles only make up about 3% of cars sold globally, or roughly 1 in 33. By 2025, however, Ives believes that 1 car in 10 sold will be an EV. And because Tesla is the “EV category leader,” it makes sense to assume that many of these EVs sold over the next five years will be Teslas.
Is Ives right about that? Ives himself admits that automotive giants General Motors and Ford, as well as newcomers like Fisker and Rivian, are “chasing after Tesla” and will attempt to cut into its market share. Regardless, he says Tesla is “unrivaled” in “production capabilities, battery technology/innovation, and brand awareness,” with admirable effects on its sales.
Demand for Teslas in Europe and in China has proven “Teflon-like,” says Ives, despite a global pandemic in 2020. In its first year of operation, Tesla’s Giga 3 factory in Shanghai has already churned out more than 150,000 Teslas, contributing all on its lonesome to nearly one-third of Elon Musk’s goal of delivering 500,000 cars globally this year. And going forward, the analyst predicts even greater reliance on China as a growth market, estimating that this single country could account for about 40% of all Teslas sold in future years. Ives admits that in China, too, Tesla faces significant competition. But in a country of 1.4 billion, the analyst sees room for BYD, Nio, Xpeng, and Li Auto to all grow their sales as well, and thrive right alongside Tesla.
Profits-wise, the analyst believes Tesla will continue to benefit from high-margin “software driven upgrades” that go “right to the bottom-line.” At the same time, he predicts that an incoming Biden-Harris administration may increase tax credits and other incentives for purchases of electric vehicles, boosting demand for Teslas at no cost to Tesla, and thus driving the company’s profits even higher.
At a minimum, Ives believes that all of these factors combine to make Tesla stock worth $560 a share (7% higher than today) in a base case scenario. And if everything goes right, the stock could be worth $1,000 in a year.
The most surprising thing of all? Despite all this, Ives only rates Tesla stock “neutral.”
Overall, while Tesla is a hot-button item in the news, Wall Street doesn’t quite know how to judge its stock. TipRanks analysis of 28 analyst ratings shows a consensus Hold rating, with 10 analysts saying Buy, 9 suggesting Hold and 9 recommending Sell. The average price target among these analysts stands at ~$390, which implies a 25% downside from current levels.