Tesla (TSLA) Stock: Jefferies Raises Price Target on Higher Capacity Ramp and Sustained Demand, Berlin Giga Will Set New Design and Assembly Standards Says Analyst

October 15, 2021 6:39 AM EDT
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Jefferies analyst Philippe Houchois raised the price target on the Buy-rated Tesla (NASDAQ: TSLA) to $950.00 per share from the prior $850.00.

The raised price target reflects higher 2021 delivery estimates (910,000), as well as higher 2022-2023 volume to 1.3 million to 1.7 million.

“Modelling a linear ramp up of production at the low end of guided 5-10k units/week for two similarly sized new facilities in Austin and Berlin, Tesla is set to add at least 500k units of actual capacity in one year to 1.6million and a solid 200-250k of actual units in 2022. The final details of Q3 also showed China domestic sales of 73.6k units, putting to rest concerns about domestic demand, while annualized Q3 output yields 530k, i.e., Shanghai running at more than full capacity. Ytd Tesla delivered slightly more units than produced despite a still "immature" production network with cross continent shipping accounting for c.20% of total production. Localizing production should improve delivery timing and associated transit costs,” Houchois said in a client note.

When it comes to the new Berlin GigaFactory, Houchois believes the plant will “ set new standards for simplicity of design and assembly” as Tesla continues to innovate and reduce complexity.

“From the information we could gather on the new Berlin facility we noted that plant design was heavily flow-driven while the aluminium casting of both front and rear underbodies may reduce by c.40% the number of body-in-white components and robots required for welding and assembly. In a global auto industry plagued by complexity,” the analyst added.

Houchois also notes that Tesla outperformed peers in the race to secure chip inventories.

Tesla is due to report on Q3 next week and Houchois projects EPS of $1.11, FCF $1.4 billion, 11.2% margin, as well as revenues of $14.5 billion.

Credit Suisse analyst Dan Levy has reiterated a Neutral rating and an $800.00 per share price target on Tesla. The analyst estimates that Elon Musk’s company will finish this year with installed capacity of 1.5 million units vs. 1.05 million currently.

Levy raised the 2021e EPS to $6.65 from $5.75 and outlined two key takeaways heading into the earnings report: 1) The bar is high for the stock into the print; 2) Ramp of new capacity (reinforcing growth ahead) and EPS upside are positives for the stock in ’21/’22, but offset by increased EV competition.

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