“In our view, Tesla is the most consequential company in the mobility ecosystem, and this is unlikely to change in the next decade,” wrote Piper Sandler analyst Alexander E. Potter.
Potter’s price target — which implies a 55% gain from Monday’s closing price — was increased from $939 (based on a 20-year discounted cash flow model) and is primarily driven by “Tesla's software opportunity.”
The analyst pointed out Tesla’s potential for “30%+ gross margins if/when more customers opt-in for purchasing the company's full self-driving (FSD) software.”
“We think that by the 2030s, Tesla could conceivably be selling vehicles at cost - or even below cost - while still achieving higher operating margins,” Potter wrote.
Wow— Elon Musk (@elonmusk) July 14, 2020
He also highlighted the company’s better than expected 2nd quarter delivery results, adding it’s “hard to see how competitors can catch up.”
Potter says the EV manufacturer’s expected target of +500K deliveries in 2020 would be “impressive” given the constraints of COVID-19.
Share’s on Tuesday were relatively flat after rallying 16% during Monday’s early session, touching all time highs just shy of $1800, before a sharp sell-off in the afternoon.
“Is it time [for investors] to redeploy capital after [Tesla shares’] amazing run?” Potter wrote. “Resoundingly, we think the answer is NO.”
Piper Sandler maintains an Overweight rating on the stock.
Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre