Tesla still has a 'golden opportunity' waiting to be unlocked, and one analyst says it should send the stock soaring

Mario Tama/Getty ImagesTesla CEO Elon Musk.
  • Tech analyst Daniel Ives has launched coverage of Tesla with an extremely bullish thesis.
  • His $US440 price target is well above the stock’s current trading price and Wall Street’s average target.
  • Ives says “near term turbulence” will pass in favour of heightened demand and production.

Not all of Wall Street is sold on Tesla’s ability to sustain the surprise profit it reported in October, but the number of “buy” ratings is increasing.

Daniel Ives, an analyst at Wedbush Securities, has launched coverage of Tesla with a price target of $US440 – 17% above Thursday’s closing price – saying that investors should ignore “near term turbulence” and instead focus on continued sales growth and innovation.

“While no investor will argue the innovation that Elon Musk & Co. have built at Tesla as the success is evident for anyone that has driven on a road over the last few years,” Ives said in a note to clients. “The real fundamental question around what the stock is worth is complex given the confluence of issues surrounding the name heading into 2019. “

Ives, who recently joined Wedbush from GBH Insights, expects Tesla’s new Gigafactory in Shanghai (currently under construction) to come online in the second half of next year. That’s critical for producing the base model, $US35,000 Model 3 that CEO Elon Musk has promised – but has yet to materialise. Most analysis says the car currently takes up to $US34,000 to build.

“Over the next 5 to 10 years, a more efficient production ramp and process will enable Tesla to see a discernible jump in profitability and margins beginning in 2020,” Ives said. “While there will be speed bumps along the way, we believe getting worldwide production annually to between 750k and 1 mm units by 2020 is an achievable target that will further bolster the Tesla growth thesis for the coming years as this remains a key hurdle to hit over the next 2 years.”

Ives’ price target is 23% above Wall Street’s average target, putting him in company with 14 other buy ratings. According to Bloomberg, 10 analysts recommend “hold” for shares of Tesla, and 14 recommend sells.

“While this will be a bumpy road and never a smooth straight line with Musk & Co. at the helm,” writes Ives. “We believe Tesla has a golden opportunity to ramp Model 3 unit sales in 2019 and beyond and thus translate into massive FCF and profitability as we look out into 2022-2030 based on this detailed auto unit analysis.”

Shares of Tesla are up 17.5% since the beginning of 2018.

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