by Tesla (TSLA) The three-for-one stock split failed to spark a rally last week, but after investor meetings and a trip to the new Berlin facility, Jefferies analyst Philippe Houchois remains convinced that Tesla is “leading the transformation of the industry with a business model based on resource efficiency”.
The talks with Tesla’s Head of Investor Relations Martin Viecha focused on “building capacity and further reducing COGS/unit,” while the opening of the Berlin and Austin facilities will help “dilute” higher Fremont plant costs.
With a new platform expected in 2024, Tesla expects further cost reductions. Based on recent comments from CEO Elon Musk, Houchois believes this will likely be a robotaxi, although the analyst understands there is still some “flexibility in the product concept.”
Another benefit should come from the Inflation Reduction Act. While Houchois notes that the wording “leaves room for interpretation,” he believes it should allow for larger contributions to reduce the battery’s cost/kwh by up to $45. “We see higher battery vertical integration giving Tesla an advantage in locating material sourcing and processing to qualify for cost incentives while sales incentives extend to corporate buyers,” the 5-star analyst further said.
As for the Berlin plant, the facility is currently producing 1,000 units per week on 2 shifts/5 days, and the goal is to see the year produce 5,000 per week. Full capacity should see the factory reach 500,000 in 4 shifts/7 days.
Finally, with the Cybertruck due in the middle of next year and the possibility of a new model hitting the market in late 2024, Houchois believes the key question is how many units can be sold with a limited range (models and options).
“With the Model Y considered to exceed traditional segments (functionality and affordability via TCO), Tesla sees room for 3-4 million units in a 3 & Y combination,” the analyst noted. “In our view Tesla continues to challenge the industry’s business model on multiple levels, including avoiding resource- and capital-intensive complexity.”
Overall, Houchois reiterated a Buy rating on Tesla shares, while his $350 price target leaves room for a 23% upside for the stock over the next 12 months. (To follow the history of Houchois, Click here)
Most on the Street support Houchois’ stance, though not everyone agrees. with 19 buys, 5 holds and 6 sells, the stock claims a consensus rating of Moderate Buy. According to the average price target of $314.58, the shares will gain 10% in the next year. (See Tesla stock forecast on TipRanks)
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Disclaimer: The views 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.