Tesla (TSLA): New Price Target of $1,200 Implies HALF the Company's Growth Target - Morgan Stanley

October 25, 2021 6:29 AM EDT
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Morgan Stanley Adam Jonas reiterated an Overweight rating on Tesla (NASDAQ: TSLA) and raised the price target to $1,200.00 per share from the prior $900.00.

A new price target “implies roughly ½ the company’s growth target, a ‘constrained’ China and virtually no autonomy,” Jonas wrote in a client note.

“The next 12 months can demonstrate Tesla’s manufacturing leadership, a step change in costs/complexity and higher growth in the vehicle user base,” the analyst added.

The price target change comes after Tesla reported better-than-expected 3Q earnings and even stronger margin, and expectations that Tesla will significantly increase its production capacity.

“Our previous forecast of 5.8 mm units by 2030 implied an annual growth rate of 23% (from 2021 to 2030) which trailed overall EV market growth. Our revised volume forecast of 8.1mm by 2030 units implies an annual growth rate of 28% which is slightly more than 1/2 the 50% growth rate targeted by the company over the long term which they reiterated in the 3Q call. We note that Tesla is currently growing sales YoY by approximately 70%. Why don't we use the company's 50% growth rate? Many reasons we can get into later including: elongated supply chain constraints, infrastructure constraints and a host of competitive and geopolitical forces that will guide the development of national electric transport 'utilities' over time,” Jonas added.

On the long-term forecasts, the analyst projects that total company revenue will grow from $51 billion in 2021 to $436 billion by 2030. The company’s EPS are seen rising from $6 in 2021 to $43 in 2030.

“About 80% of the value of our Tesla Price Target is driven by 2 key segments: 1) The Automotive Business (~50% of total value) and 2) Network Services (~30% of total value). The remaining 20% of our target is comprised of: Tesla Insurance, Tesla Energy, Tesla Mobility/Rideshare and EV/Battery supply to 3rd party customers. Outside of Autos & Network Services, we made immaterial changes to the other segments' valuations with this update. An increase in unit assumptions has a direct impact on the Network Services business as Tesla grows its car parc and potential 'monetizable' user base. By 2030 we now expect Tesla's global car parc to grow to 38mm, from 2.2mm at the end of 2021. This represents a 37% CAGR in the car parc or 'installed base’,” the analyst added.

Shares of Tesla are up 2.5% in pre-open Monday.

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