Tesla Inc.’s most bullish Wall Street analyst predicts the electric-car maker’s dizzying rally will accelerate this year and that the stock will trade in the US$640-to-US$960 range in early 2021.
New Street Research analyst Pierre Ferragu anticipates the company will sell 2 million to 3 million cars per year after 2025 at industry-leading margins, justifying a market capitalization of US$230 billion to US$350 billion, or about US$1,100 to US$1,700 per share.
“The stock will remain volatile, as the spread between bull and bear cases remains wide,” said Ferragu, who boosted his price target to a Street high. “And God only knows what the next controversy will be.”
Tesla is set to report quarterly earnings next week. Shares of the company rose as much as 6.9 per cent to touch US$545.90 in New York on Tuesday, and have increased more than 100 per cent over the past three months. A surprise third-quarter profit and strong deliveries for the fourth quarter helped fuel the rally, along with the opening of its China plant.
Ferragu, who raised his price target to a US$800 from previous US$530, expects the company to beat estimates for free cash flow when it releases fourth-quarter earnings on Jan. 29.
He also predicts 2020 delivery guidance will exceed projections, and sees a potential drop in gross margins in the first half of the year as Shanghai-assembled Model 3s — which have higher fixed costs per car — increase in the overall mix.
Tesla has the cool factor of many features in addition to self-driving capability and production capability, which puts it way ahead of it's competitors. From my analysis, I can say that there will be a hugh demand for Tesla cars in the next 5 years.
In additon to demand, with Tesla's new Berlin Gigafactory set to be operational in mid 2021 and Terafactory set to be operational by the 2021 end, the company's production will increase. This increase in production and its competitive edge may rally tesla stock up to 1050$ per share before year end.
To conclude, the stock is the right investment for the long term investors at the current moment, with an advice for short term investors to buy and sell during the week of Fiscal Quater.