If deliveries continue to perform as well as they did in the fourth quarter of last year, the stock price will certainly continue to rise.
Earlier last week, Tesla (TSLA), an electric vehicle giant that rose 54.5 percent last year, again broke through $1,200 intraday, close to an all-time high of $1,243.49, but recently fell below the $1,200 mark. On Monday (January 10), Tesla broke the four-day decline, closing up 3.03% to $1058.12.
At present, there are more and more optimistic voices on Wall Street, and many analysts have recently raised the target price of the stock, and the delivery volume in the fourth quarter of last year exceeded expectations is the main reason for analysts to do so. Tesla sold about 309,000 vehicles in the quarter, well above Wall Street's forecast of 267,000. Higher delivery means more revenue.
Tesla is currently worth about $1.06 trillion, and bulls and bears continue to disagree on whether the company, which has always been controversial, is worth so much money. The current highest price target is $1400, while the lowest price is only $67, and while the average price target has risen from about $662 three months ago to $916, it is still 14% below the current share price.
Barron's pointed out that in the context of accelerated yields and sell-offs in growth stocks, the overall pressure on high-growth stocks such as Tesla cannot be ignored. If Tesla's deliveries continue to beat expectations as much as it did in the fourth quarter of last year, then the stock price will continue to rise.
Tesla's advantage in the electric vehicle race has expanded
After the rally, Morgan Stanley analyst Adam Jonas raised Tesla's price target from $1,200 to $1,300 on Monday, keeping the "buy" rating unchanged.
Deutsche Bank raised Tesla's price target from $1,000 to $1,200 late last year, and Goldman Sachs analyst Mark Delaney raised tesla price targets from $1,125 to $1,200 on Sunday, while maintaining a "buy" rating and listing Tesla as its 2022 stock of choice.
Morgan Stanley's Jonas thinks Tesla's valuation is reasonable because the company is far ahead of the electric car race. Jonas said: "The electric car race is like a marathon that is 26 miles long, Tesla is far ahead at mile 21, and other companies are either still in mile 2 or 'tying their shoelaces' at the starting point." More importantly, Jonas believes the latest delivery data shows that Tesla is getting stronger in this race.
Other analysts hold similar views. Deutsche Bank analysts believe Tesla's advances in battery technology, capacity and, especially, cost will help the company expand its lead in the electric vehicle trend that has swept the world. They called 2022 a pivotal year in determining Tesla's future growth and profitability, with catalysts including the expansion of two new plants in Berlin and Austin, Texas.
Goldman Sachs' Delaney pointed out that the trend of electric vehicles will accelerate in 2022, and Tesla will remain the leader in this field.
Jefferies believes that although Tesla lags behind established car companies in details such as manufacturing quality, these problems can be solved, and the company's leading position in software, batteries and autonomous driving are all lasting advantages, and Tesla can use software to improve the practicality of vehicles and increase profit potential.
Wedbush analyst Dan Ives is one of Tesla's most optimistic analysts. He believes Tesla has "alchemy." Ives gave a price target of $1400, and in a bull market scenario, it could even reach $1800, and he predicted that Tesla would reach a market capitalization of $2 trillion in 18 months.
In addition to competitive advantage, he said: "The key reason for bullishness is still the Chinese market", he estimates that the Chinese market deliveries will account for 40% of Tesla's total deliveries in 2022. Ives said that this year's Chinese sales will account for $400 per share of Tesla's stock price.
The bears think $67 is too high
The average price target for analysts who currently give a "buy" rating is about $1200, while the average price target for analysts giving other ratings is around $580, and the $620 spread is equivalent to the value of two Toyotas.
Most bears believe that while Tesla has excelled in the electric car space, it is not enough to justify a market capitalization of more than $1 trillion. J.P. Morgan analyst Ryan Brinkman gave a price target of $295, meaning Tesla would fall about 70 percent sharply. Brickman believes that Tesla's current car production is only one-tenth of Toyota's car production, and the valuation is too high.
Gordon Johnson, founder of GLJ Research, gave the lowest price target, at just $67. Johnson believes that there is no reason to think that Tesla's other businesses can do well beyond electric vehicles. "For example, if McDonald's starts selling sneakers, chairs or pianos, the valuation of these businesses can be added to the total valuation, but for the car company, the stock price should reflect the increase in production, and if it is bullish, the company will have to achieve production that other car companies can't match. (Bulls argue that Tesla's gigafactories in Austin, Texas, and Berlin can solve the problem of production.) ）
Johnson also believes that once competitors emerge, Tesla's market share in the United States will face a sharp decline, because in China, Tesla's market share has dropped from 23% to 11%, and in the European Union, from 33% to 15%.
After introducing his valuation model to Barron's, Johnson noted that he was concerned that the $67 price target he gave was too high. Johnson said: "I have received death threats because of this target price, and now I do not answer unknown calls at all. ”
Barron's believes that the impact of the target price increase on the stock price trend is not necessarily as large as the stock rating is upgraded, and in the environment of rising interest rates, the current overall resistance of growth stocks is huge. Another fundamental risk that has always existed in the ev industry is that sales growth may not meet expectations.
Barron's has pointed out in a previous report that less than expected delivery growth will be fatal at a time when competition for electric vehicles is intensifying, and investors in this area do not have much patience for business execution errors in electric vehicle companies. Barron's believes that whether Tesla is worth $1 trillion or not, the debate between bulls and bears will not stop, and if deliveries can maintain the same excellent performance as in the fourth quarter of last year, the stock price will certainly continue to rise.
Wen | Contributor to the Chinese edition of Barron's Magazine Guo Liqun
Edit | Kang Juan
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