Morningstar Boosts target on Tesla (TSLA:NSD) to $225 on improved Outlook

Morningstar lifts target

Morningstar(Rank#138), the investment research firm, recently raised its fair value estimate (FVE) for Tesla’s stock from $220 to $225 per share following the company’s investor day improvements. This upward revision was based on an improved outlook for Tesla’s free cash flow generation in the long term. Morningstar also reiterated their narrow-moat rating for the company, indicating a sustainable competitive advantage.

Despite this positive news, Tesla’s shares dropped by nearly 6% in after-hours trading, which Morningstar attributes to market disappointment regarding the lack of details surrounding the new affordable vehicle platform and the absence of long-term financial targets. However, Morningstar sees this selloff as an opportunity to buy Tesla shares at a slight undervaluation, with the stock trading at roughly 15% below their FVE.

While Tesla’s entry-level vehicle may not be in commercial production in the near term, Morningstar believes that the company will eventually bring this new model into production, driving long-term growth in deliveries. More importantly, Morningstar believes that Tesla’s ability to scale should drive higher long-term free cash flow generation, which will be boosted by the company’s software-focused operations and its use of artificial intelligence (AI) for much of its research and development.

Morningstar also noted that Tesla’s plan to simplify its manufacturing process should reduce its capital expenditure intensity over time. As a result, Morningstar reduced their long-term assumptions for overhead expenses and capital expenditures, which bodes well for the company’s future profitability.

Morningstar’s revised FVE for Tesla’s stock to $225 highlights the investment research firm’s positive outlook for the company’s long-term growth prospects. While Tesla’s shares may have experienced some short-term volatility following the investor day, Morningstar believes that this is a temporary setback and that investors who buy Tesla’s shares now will benefit from the company’s future growth potential.

TSLA Stock Price Forecast & Analysis

The average analyst target price for Tesla Inc over the next 12 months is USD 226.88, and the average analyst rating is Buy. Stock Target Advisor’s analysis has Tesla Inc’s stock is Slightly Bullish based on 11 positive signals and 5 negative signals. Tesla’s stock price has increased by 7.81% over the past week, but has decreased by 35.65% over the last year.

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