A Tesla Model Y electric vehicle.
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Tesla has a new top price target on Wall Street. It’s a doozy.
New Street Research analyst Pierre Ferragu is a longtime bull on electric-vehicle giant Tesla (ticker: TSLA
). Back in 2019, he had a price target north of $500 for Tesla stock when it was below $300. That was before Tesla’s five-for-one stock split. It was also back when Tesla was worth roughly $60 billion.
Ferragu has stayed bullish, for the most part, but other analysts have taken turns claiming the top price-target slot. Coming into Wednesday, the top Tesla price target came from China Securities analyst Zhu Yue at $1,485. The analyst rates Tesla stock at Buy.
That target values Tesla at roughly $1.5 trillion. Tesla has about 1 billion shares outstanding, excluding management stock options that are likely to become shares someday.
Ferragu took his price target past Zhu’s Wednesday, setting it at $1,580, up from a recent price target of $1,298. That’s the new highest mark on Wall Street and values the company at about $1.6 trillion.
The bump isn’t giving Tesla stock the boost bulls would love, though. Shares are down about 0.6% in early trading. The S&P 500 index and Dow Jones Industrial Average are up 0.1% and 0.3%, respectively.
Still, “multiple strong catalysts” in 2022 can drive shares higher in coming months, wrote Ferragu in his Wednesday report. Those include: an upside fourth quarter, strong production from Tesla’s Shanghai facility, new production capacity coming online in Germany and Texas, and new batteries for Tesla EVs.
For the fourth quarter, Ferragu expects Tesla to deliver about 283,000 vehicles. Wall Street projects about 266,000. What’s more, Ferragu expects about 1.5 million vehicles sold for Tesla in 2022. Current Wall Street estimates for 2022 deliveries range from about 1.3 million to 1.4 million units.
The higher volumes will come from Tesla’s two new manufacturing facilities.
“Despite the ramp of two factories, we expect margins to expand,” added the analyst. Ferragu expects gross profits to break 30% by the end of 2022, up from the mid-20% currently.
Batteries will benefit the company this coming year too. “We expect 4680 production to be in full swing by year-end and grow rapidly from there.” The “4680” refers to the cylinder-shaped batteries Tesla is planning to use. When batteries get bigger, costs go down and performance improves. The “46” in “4680” refers to the diameter in millimeters, while the “80” refers to the length in millimeters. The current generation of EV batteries used by Tesla and others are called “2170.” That’s 21 millimeters in diameter and 70 millimeters in length.
AA batteries for consumer electronics are about 14 millimeters in diameter and 50 millimeters in length.
The Wall Street Buy-rating ratio for Tesla stock didn’t change with Ferragu’s new target as he was already at Buy. Overall, 48% of about 50 analysts covering Tesla stock rate it at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
The average analyst price target edged up about $50 over the past month to about $830.
Write to Al Root at [email protected]
