'No Rival to Get Even Close' - Tesla (TSLA) Shares Soar as UBS Raises Price Target by Nearly 40%

December 7, 2021 6:47 AM EST
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Price: $846.35 +2.08%

Rating Summary:
    25 Buy, 21 Hold, 12 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 16 | New: 32
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UBS analyst Patrick Hummel raised the price target on Tesla (NASDAQ: TSLA) to $1,000.00 per share from the prior $725.00 to reflect the company’s EV leadership position.

The new price target is still about 10% below the current TSLA share price, hence the Neutral rating has been left unchanged. The price target revision also reflects the higher earnings and FCF estimates.

“Tesla is likely to continue beating consensus expectations also in 2022 in terms of top line growth and margins, in a global EV market that keeps accelerating rapidly. Tesla's structurally better access to chips and batteries through vertical integration is a key differentiator vs. most competitors and should help to cement Tesla's market leadership with ~20% global BEV share, in combination with industry-leading profitability. We've raised estimates sharply to reflect this undisputed leadership (~30% ahead of consensus) - however, current valuation fully reflects such steep curve, in our opinion,” Hummel said in a client note.

The analyst sees Tesla delivering 894,000 EV units in 2021 and 1.4 million in 2022. Hummel also raised auto gross margin ex-credits to 29.1% for 2022 and 30.6% in 2023. UBS projects that Tesla will sell 2.9 million cars in 2025, therefore catching BMW or Mercedes Benz.

“In light of several rounds of price increases ytd and steep volume growth, consensus likely still under-estimates Tesla’s earnings power in the quarters ahead. We are ~15% ahead of consensus in revenues and ~30% in EBIT 2022E. Other key catalysts to watch: Ramp-up of Giga Berlin and Austin, the new 4680 cell plant in Fremont, milestones in FSD. Based on our client conversations, we think buy-side expectations (especially those of TSLA owners) are already well ahead of sell-side consensus,” the analyst added.

Hummel adds that Tesla share price already reflects the expected business growth, including huge revenue opportunities from software.

“On our 2025E EPS of $20 (GAAP, diluted), which is ~50% ahead of consensus, Tesla trades at ~50x PE. We think well above 50% of today’s market cap relate to the new software-enabled revenue pools (AV, robotaxi, connected services, insurance etc), even taking it as a given that Tesla will be amongst the world’s largest carmakers in 2030,” Hummel concluded.

Tesla share price is up 4% in pre-open Tuesday.

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