The electric vehicle (EV) revolution is in its first innings and the industry has only started to gain traction. However, Mizuho analyst Vijay Rakesh says the worldwide focus on sustainable energy and major battery technology advances, make it “one of the biggest transformations in automotive industry history.”
At the center of this new paradigm, one name stands out above all others -- Tesla (TSLA).
“With Tesla's cutting-edge battery technology driving key leadership in the EV market and providing sustainable energy storage for residential & industrial applications, disrupting the global energy market, we see TSLA as a leader for the next decade and beyond,” Rakesh noted.
Amongst other things, what sets Tesla apart, is its in-house battery development. The company boasts industry-leading 4680 battery cell technology with “5x battery capacity and a ~49% cost reduction versus any battery available today.”
By 2030, Tesla intends to grow its capacity tenfold to 3TWh. In the making of EVs, batteries amount to 30% of costs. Keeping the costs low is, therefore, “key to sustainable leadership and lowering the average MSRP (manufacturer's suggested retail price) toward $25,000,” thus making EVs affordable to the wider public.
Additionally, unlike any other OEMs (original equipment manufacturer), Tesla is fully vertically integrated. All aspects of production remain under the Tesla umbrella; from in-house chassis/powertrain to ADAS hardware/software, to battery production. All these will also help reduce costs via the company’s “globally decentralized manufacturing and high-volume Gigafactories in key markets.”
What’s more, keeping production local – Tesla has factories in the US, China and soon in Berlin, Germany - has other advantages; Tesla can benefit from local subsidies, bypass tariffs and ocean freight costs.
The global footprint will help speed up production, too. Rakesh expects Tesla’s 2021E global production capacity to increase by 60% year-over-year to roughly 1.34 million vehicles.
Accordingly, Rakesh initiated coverage of Tesla with a Buy rating and set a $775 price target for the shares. This forecast calls for 12% gains over the next 12 months. (To watch Rakesh’s track record, click here)
Tesla, however, always generate differing opinions, reflected in the wide spread of its ratings. With 14 Holds, 9 Buys and 7 Sells, the analyst consensus rate the stock a Hold. The Street expects shares to be changing hands at 7% discount, given the average price target stands at $641.12. (See Tesla stock analysis on TipRanks)
To find good ideas for EV stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.