Tesla’s (TSLA) three-for-one stock split failed to ignite a rally last week but following investor meetings and a trip to Berlin's new facility, Jefferies analyst Philippe Houchois remains convinced Tesla is “leading industry transformation with a business model driven by resource efficiency.”
The talks with Tesla’s Head of Investor Relations Martin Viecha focused on “capacity build and further reduction in COGS/unit” while the opening of the Berlin and Austin facilities will go toward helping “dilute” the higher cost Fremont factory.
With a new platform anticipated in 2024, Tesla expects a further reduction in costs. Going by recent comments from CEO Elon Musk, Houchois thinks this will likely be a robotaxi although the analyst understands there is still some “flexibility on product concept.”
Another benefit should come from the Inflation Reduction Act. While Houchois notes the wording “leaves room for interpretation,” he believes it should allow for larger contributions to reduce battery cost/kwh by up to $45. “We see higher vertical battery integration giving Tesla an edge in localizing material sourcing and processing to qualify for cost incentives while sales incentives extend to corporate buyers,” the 5-star analyst further said.
Regarding the Berlin plant, the facility is currently producing 1,000 units per week on 2 shifts/5 days, and the target is to see out the year producing 5,000 a week. Full capacity should see the plant reach 500,000 on 4 shifts/7days.
Finally, with the Cybertruck expected mid-next year and the possibility of a new model hitting the market in late 2024, Houchois thinks the key question is how “many units can be sold with a limited line-up (models and options).”
“With Model Y seen as transcending traditional segments (functionality and affordability through TCO), Tesla sees scope for 3-4m units combined 3 & Y,” the analyst noted. “In our view Tesla continues to challenge the industry's business model at multiple levels including by avoiding resource- and capital-intensive complexity.”
All in all, Houchois reiterated a Buy rating on Tesla shares, while his $350 price target makes room for 23% share appreciation over the next 12 months. (To watch Houchois’s track record, click here)
Most on the Street back Houchois’s stance although not all are on board; with 19 Buys, 5 Holds and 6 Sells, the stock claims a Moderate Buy consensus rating. According to the $314.58 average price target, over the next year the shares will see a 10% growth. (See Tesla stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.