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Tesla: Leading the Energy Revolution
Data from the International Energy Agency (IEA) shows that in 2019 fossil fuels represented more than 80% of the world’s primary energy sources and were responsible for more than 99% of CO2 emissions across the globe.
It is obvious, then, that in order to lower C02 emissions, the planet’s energy supply sources must be pivoted away from fossil fuels to what Canaccord analyst Jonathan Dorsheimer calls a “combination of renewables.” These include hydro, wind, solar, nuclear, and other renewable/clean technologies.
While this energy transition will be essential in saving the planet, Dorsheimer also sees it as “one of the greatest investment opportunities since the internet and communications revolution.”
"The capital formation, innovation, and profit potential ahead should be vibrant and, literally, world-changing,” the 5-star analyst went on to add.
All this preamble, however, is to introduce the “sustainability behemoth,” namely Tesla (TSLA).
The company’s modus operandi revolves around clean energy, having ushered in the electric vehicle (EV) revolution. EVs still account for the majority of Tesla’s revenue - around 87% as of 1Q22 - and Dorsheimer thinks this is set to continue for some time, especially considering the growth anticipated in the EV market and Tesla’s “continued leadership.”
But Tesla’s sustainability credentials are not limited to EVs. In addition to vehicle autonomy, and robotics, Tesla is also focused on renewables (energy generation and storage) which might be “loss-making” for now but “should continue to scale and improve profitability.”
With Tesla being at the forefront of a new paradigm, Dorsheimer sees many similarities with another company whose groundbreaking products were greeted with suspicion initially.
The transition from traditional handsets to smartphones was initiated by Apple’s iPhone but many expected the high price and “single product focus” to be a problem and even with the iPhone’s early success, many expected “traditional handset OEMs would crush Apple as they ramped their respective offerings.” But Apple – and the iPhone - proved it had staying power, and Dorsheimer thinks Tesla could yet surpass Apple’s achievements.
“We see staggering similarities between Apple and Tesla, except Tesla is Apple on steroids,” Dorsheimer opined. “Both have leading industry margins and share of profits thanks to product focus and vertical integration; except we see Tesla’s manufacturing chops as a key differentiating factor.”
Accordingly, with all the above as backdrop, Dorsheimer initiated coverage of Tesla with a Buy rating and a $801 price target. The implication for investors? Upside of 15% from current levels. (To watch Dorsheimer’s track record, click here)
As is to be expected, Tesla elicits a wide spectrum of opinions on Wall Street. The stock garners 16 Buys, and with the addition of 8 Holds and 6 Sells, claims a Moderate Buy consensus rating. Going by the $851.46 average price target, the shares are anticipated to generate returns of 18% in the year ahead. (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.