Tesla (TSLA) Upgraded to 'Buy' at Canaccord Genuity and PT Raised by 155%, as it 'Holds a Several-Year Lead' in EV While Storage Business Accelerates

April 12, 2021 7:25 AM EDT
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Canaccord Genuity analyst Jed Dorsheimer upgraded Tesla (NASDAQ: TSLA) to a “Buy” from “Hold” Monday and raised the price target to $1,071.00 from the prior $419.00 per share.

Despite a "rich" valuation and extremely high multiple (63x ’24 EV/ EBITDA), Dorsheimer stresses that Elon Musk's company holds a “several-year lead” in the sector while it continues to expand aggressively into storage.

TSLA has successfully transitioned to mass-market EVs while strong investments in battery manufacturing expertise and production capacity show conference that Elon Musk and Co. will aggressively attack and conquer a trillion-dollar market in energy generation and storage.

“Tesla’s focus on first-principle engineering we believe will radically change the battery market, enabling the company to further the lead in BEVs and expand into the solar and home energy markets with its Powerwall products,” the analyst wrote in a note sent to clients.

As far as supply challenges are concerned, the analysts expect the situation to begin to alleviate in 2022 as new factories - Giga Nevada, Texas, and Berlin - come online.

“Tesla is tapping all available resources to meet battery demand, including in-house production at Fremont, partner Panasonic production at Giga Nevada, supply agreements with LG, and recently a major switch to LFP cells from CATL in “made in China” (MIC) entry level Model 3/Ys. Yet, it remains battery supply constrained. Notably, Semi, Cybertruck, and Roadster are all waiting for the new 4680 cell production to come online.”

“We believe, large capital investments to increase battery production capacity will begin to pay off in 2022, as Giga Texas and Berlin 4680 cell production starts. Cell suppliers Panasonic and LG are also working with Tesla to produce the 4680 cell, Panasonic specifically plans to start production late 2021 at the partner facility Giga Nevada,” the analyst added.

TSLA is also making strides on the solar front as it increased its online presence.

“We believe the Company is aggressively bidding solar installs using vanilla panels and leveraging the Powerwall and a Tesla inverter as the motivation. In 2021, we expect Tesla to push a product combination of solar panels, Powerwall energy storage, and their energy arbitrage software product Autobidder that sells electricity to the grid when its profitable and keeps it for at home-use when not.”

As a result, the EV company is likely to aggressively attack this market, while leveraging healthier margins per cell. In 2025, the analyst expects the energy generation and storage business to grow to $8 billion in revenue with a 25%+ gross margin.

Dorsheimer also takes note of Model 3/Y market share, with these two representing 99% of TSLA’s Q1 deliveries. This shows that the company is a leader in the mass-market BEV industry.

“We believe auto gross margins will continue to improve to 25%+ as Model 3/Y volumes increase from Giga Shanghai and entry models using LFP batteries, and tail wind from credit sales in China.

TSLA’s new battery innovations in manufacturing, cell design, and auto structural integration will reduce $/kWh by 30%, further widening the gap, and its lead over traditional OEMs.”

The analyst also praises TSLA for creating an ecosystem similar to that one of Apple, built by Tim Cook, to become the most recognized brand in energy storage.

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