UBS doubles price target for Tesla stock as Battery Day innovations materialise

Susan Walsh/Associated Press
  • Tesla’sSeptember 22 Battery Day event will introduce groundbreaking technologies that can boost the automaker’s profits and vehicle sales for years to come, UBS analysts said Friday.
  • The team doubled its price target for Tesla shares to $US325 from $US160 in a note to clients while maintaining a “neutral” rating.
  • Tesla is expected to debut new battery cell innovations that boost energy density by roughly 50%. That increase can lower cell costs by $US2,300 per vehicle over the next three years, UBS said.
  • Potential updates to Tesla’s Model S and Model X cars and a next-generation supercharger can drive additional upside at the event, the analysts added.
  • Watch Tesla trade live here.

Tesla’s upcoming Battery Day event will have plenty in store for bullish investors, from new cell technologies to a potential vehicle refresh, UBS analysts said Friday.

The team led by Patrick Hummel doubled its price target for the automaker’s shares to $US325 from $US160 in a note to clients while maintaining its “neutral” rating. The updated target is based on expectations for greater sales volumes, higher average-vehicle revenue opportunity, and stronger margins. The latter may be the first of the three drivers to come about, as UBS expects new battery technologies to usher in a new era of profitability for Tesla.

Setting aside the stock’s recent slump, investors’ hopes for the September 22 Battery Day event and the company’s share price “have been in a self-reinforcing upwards circle over the past few months,” the team wrote. The event’s key reveal will likely focus on dry electrode technology, which is expected to boost battery cell energy density by roughly 50%.

The tech will materialise in a million-mile battery cell for Tesla’s vehicles, the analysts said. Such a long-lasting product is expected to drive savings of about $US2,300 per vehicle over the next three years. The breakthrough will also further Tesla’s lead over its competition, according to the bank.

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Still, Tesla shareholders largely expect battery innovations and have priced in such an announcement accordingly. UBS sees potential for a refresh of the automaker’s Model S and Model X vehicles, including a new top-of-the-range version that may be the first to include the new cells. A surprise facelift could have a moderate impact on future earnings and Tesla’s share price, the team said.

There’s even a slight chance Tesla will unveil a next-generation supercharger, the analysts said. Though such an announcement would likely do little to move shares higher in the near-term, it could extend the company’s lead over automakers planning their own electric vehicle charging networks, they added.

In all, UBS expects Tesla to reach an operating margin of 15.1% and sell 1.4 million cars by 2023. Lower battery costs will drive the initial boost before sales of Tesla’s Cybertruck and Model Y models will further the lead. The remainder of the margin growth will come from a higher take-rate of Tesla’s self-driving package, the analysts said.

Telsa traded at $US374.56 as of 9:45 a.m. ET Friday, up roughly 335% year-to-date.

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