Tesla Inc. (NASDAQ: TSLA) finally has arrived. After years of being called a cult stock with zero to negative earnings to show for it, investors finally have been rewarded with the stock more than doubling over the past quarter. With a spectacular fourth-quarter earnings report, it looks like analysts may be coming around on Tesla too. In fact, one independent research firm is forecasting incredible numbers for the electric vehicle giant for this year and beyond.
Argus reiterated a Buy rating for Tesla shares and raised its price target to $808 from $556, implying upside of 24% from the most recent closing price of $650.57.
The firm was quick to note that despite the recent spike in the stock price, it continues to see significant upside for Tesla, based on accelerating revenue trends and strong demand for the new Model 3.
In the fourth quarter, Tesla reported higher earnings that were driven by higher overall revenue, an improvement in Automotive sales, and a decline in R&D costs. Additionally, Model 3 deliveries rose 42% from the prior year.
Management also said that R&D costs would fall and that the company would “comfortably” produce more than 500,000 vehicles in 2020, up more than 40% from 2019.
In addition, Tesla has completed construction of its battery production plant, or Gigafactory, in Nevada. Management believes they will reduce battery pack costs by more than 30%. The lower battery cost allows Tesla to price its third-generation vehicles at about $35,000, well below the price of older models. The plant has been constructed in partnership with Panasonic, which is supplying Tesla with specially designed lithium-ion fuel cells for electric vehicles.
As a result, Argus raised its 2020 EPS estimate to $8.01 from $5.96 and set a 2021 estimate of $15.68, implying a near doubling of earnings next year.
Argus gave its investment thesis as follows:
Our positive view assumes continued revenue growth from the legacy Model S and Model X, as well as strong demand for the new Model 3, which accounted for more than 80% of 4Q19 production. Despite past production delays, parts shortages, labor cost overruns, and other difficulties, we expect Tesla to benefit from its dominant position in the electric vehicle industry and to improve performance in 2020 and beyond.
Shares of Tesla traded up about 13% on Monday, at $733.54 in a 52-week range of $176.99 to $736.72. The consensus price target is $442.65.
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