Piper Sandler Tesla Stock Forecast
On June Tuesday June 6th,Potter maintained his bullish outlook on Tesla, rating the shares as a “Buy” with a 12 month price target of $280, which represents a more than 25% increase from today’s current market price.
Piper Sandler (Rank#15) analyst Alexander Potter conducted an analysis on Tesla’s stock and concluded that while the stock is not cheap, there is still potential for growth beyond its car business.
Citigroup (Rank#13) also just raised their target forecast to $215 from $175, keeping their “Neutral” rating intact.
One of the key points highlighted by Potter is the significant difference in valuation between Tesla and other automakers like Toyota. Tesla’s market capitalization is nearly three times that of Toyota, despite Toyota being one of the largest and consistently profitable auto manufacturers. When comparing their earnings multiples, Toyota trades at around nine times estimated calendar 2024 earnings, while Tesla trades at 45 times. This disparity is partly due to Tesla’s faster growth rate, with unit sales expected to reach approximately 1.8 million in 2023, up around 40%, compared to Toyota’s annual sales of around 10 million units. Even if Tesla were to achieve similar sales volumes as Toyota, its valuation per vehicle would still be significantly higher.
However, Potter’s analysis goes beyond Tesla’s car business. He sees the potential for new revenue streams, which he believes are a core aspect of the stock’s investment thesis. Tesla’s additional revenue streams include sales of solar panels, battery-storage products for residential consumers, utility-scale battery-storage products, and driver-assistance software. Notably, Tesla’s software-based product for driver assistance can be sold for up to $15,000 per vehicle, which is unique in the passenger-car industry. Furthermore, Tesla’s moonshot project, Optimus, an AI-driven robot, is considered by CEO Elon Musk to have the potential to be the most valuable part of Tesla in the long term.
Potter also identifies opportunities in Tesla’s expansion into other sectors, such as heat pumps for homes. Tesla’s vehicle HVAC systems already use heat pumps, which are more efficient than conventional heating and cooling technologies. These developments contribute to Potter’s valuation of the car business at $135 a share, or approximately $430 billion, and the rest of Tesla at $145 a share, or about $460 billion, including software and energy storage.
It is worth noting that Tesla’s stock price has seen significant volatility, and at the time of the analysis, it had risen by about 40% over the past six weeks, outperforming the broader market.
