Tesla Target Hiked 30% by Piper Sandler Based on China Potential
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Tesla Inc.’s growth potential in China means the stock is undervalued even after a recent rally pushed the shares almost to $500 apiece, analysts at Piper Sandler Cos. said while boosting their target price by more than 30%.
Piper raised its target to $553 from $423, making it the most bullish among forecasters tracked by Bloomberg. The stock has doubled in the past three months, closing at a near-record $481.34 on Thursday. The stock reached as high as $498.80 intraday Thursday, and the market capitalization has come level with the combined values of automaker peers General Motors Co. and Ford Co.
The electric-vehicle maker started delivering its China-built Model 3 sedans to local customers this week, a year after its first factory outside the U.S. broke ground. Tesla’s sales in China are set to double to 225,000 cars next year from 112,000 in 2020, Piper estimates.
“Bottom line: If Tesla’s Model 3 market share in the United States can be replicated in China -- and if this logic extends also to Model Y -- then Tesla’s annual volume in China alone would eventually exceed 650k units,” Piper analyst Alexander Potter said in the Jan. 9 note.
Tesla shares rose as much as 0.3% to $483 in New York on Friday. The stock gained 26% last year while the S&P 500 rose 29%.
Wedbush analyst Daniel Ives said the company’s China opportunity is worth between $75 to $100 per share, and remained the “key fuel in the growth engine” along with “healthy” demand for Model 3 in Europe.
“The bull case scenario on the stock remains $600 as we believe Tesla’s ability to ramp production and demand in the key China region during the course of 2020 will be a major swing factor on the stock,” Ives wrote in a note.
Last year, Tesla delivered a record 367,500 vehicles globally. The company faces stiff competition in China from BMW AG, Daimler AG and Volkswagen AG’s Audi, making it unclear if it can replicate its U.S. success in the country, Piper said.
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