The first two reasons are easy to explain. First, China is doing better coming out of second quarter Covid lockdowns. And the Berlin factory is ramping up production.
“A sharp recovery in China, following capacity expansion at its Shanghai gigafactory, looks set to drive output to 20,000 units/week in August,” Daiwa analyst Jairam Nathan wrote in a report on Monday.
That’s one of the reasons he raised his price target
Tesla
stock at $325 from $310. Nathan rates the stock a Buy.
Another reason Nathan mentioned is the increase in production at Tesla’s new factory in Berlin. More cars coming out of that factory raises the possibility that Tesla could beat third-quarter delivery estimates. Wall Street is currently forecasting about 357,000 deliveries for the third quarter, up from about 255,000 in the second quarter.
Nathan, meanwhile, is just under 350,000 units for the third quarter.
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Tesla also let some Wall Street analysts into the Berlin factory recently, and most were impressed by what they saw. New Street Research analyst Pierre Ferragu and UBS analyst Patrick Hummel recently wrote that new technology in facilities can help reduce costs and improve margins.
However, Ferragu and Hummel did not change their share price targets after the split or the trip to Berlin. Barron’sHowever, it found at least seven Tesla price target changes related to the three-for-one stock split that ended on August 25.
The price target changes due to the splits had an upward bias, adding somewhere between $4 billion and $40 billion to Tesla’s market value for the split alone. That’s as much as 5% of Tesla’s current market cap.
That seems like a big hit, but analysts seem to prefer rounded numbers. A $1,000 target before the split, for example, became $333.33 after the split. Analysts don’t usually forecast prices with this accuracy, and it looks like $340 or $350 is more attractive to the street than $333.
Stock splits can help stocks. Investors tend to believe that a split signals positive things for a company. No one splits a stock waiting for it to go down. But rounding price targets after a breakout, of course, isn’t really an investable or tradable move. It’s more of a Wall Street curiosity. Analysts prefer rounding and are biased to the upside of the target price. The last point makes sense. Stocks grow over time.
Tesla stock is down about 7% since Aug. 24, the day before the split. The
S&P 500
and
Nasdaq Composite
it is about 4% over the same period.
Write to Al Root at allen.root@dowjones.com
