Tesla stock, while not inexpensive based solely on its car business, presents significant upside potential, according to Piper Sandler analyst Alexander Potter. Rated as a Buy with a price target of $280, Potter’s optimistic outlook suggests a more than 25% increase from the current market price.
The comparison between Tesla’s market capitalization and that of Toyota Motor highlights the company’s remarkable growth. With a market cap of around $680 billion, Tesla surpasses Toyota’s value by almost threefold. Despite Toyota’s consistent profitability and large-scale operations, Tesla’s rapid expansion sets it apart.
Predicted unit sales for Tesla in 2023 are estimated at approximately 1.8 million vehicles, representing a 40% surge. In comparison, Toyota’s annual sales hover around 10 million units. Even if Tesla achieved the same sales volume as Toyota, Tesla would still value each vehicle sold at approximately $68,000, while Toyota values its vehicles at around $24,000 per unit.
However, Tesla’s appeal extends beyond its car business. Potter emphasizes the significance of new revenue streams, contributing to the overall investment thesis. Tesla’s offerings include solar panels, residential battery-storage products, and utility-scale battery-storage solutions. The company also sells driver-assistance software and possesses potential moonshot opportunities, such as the AI-driven robot Optimus, which CEO Elon Musk believes could become Tesla’s most valuable asset.
Potter recognizes additional opportunities beyond cars, such as Tesla’s heat pumps for homes. These systems, known for their energy efficiency compared to traditional heating and cooling technologies, add value to the company’s diversified portfolio.
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Potter’s assessment values Tesla’s car business at $135 per share, equivalent to approximately $430 billion, nearly double the market value of Toyota’s equity. The remaining aspects of Tesla, including software and energy storage, are valued at $145 per share, or about $460 billion.
With a price target of $280, Potter’s estimate ranks among the higher projections on Wall Street, with FactSet data indicating the highest price target at $300 from New Street Research analyst Pierre Ferragu. The average price target stands at approximately $192.
Around 50% of analysts covering Tesla rate the stock as a Buy, slightly lower than the average Buy-rating ratio for a stock in the S&P 500, which sits at about 53%.
Tesla stock demonstrated continued growth, closing 1.7% higher on Tuesday. Meanwhile, the S&P 500 and Nasdaq Composite indexes increased by 0.2% and 0.4%, respectively.
Over the course of seven consecutive days, Tesla stock has experienced a consistent upward trend, surging nearly 19% during this period.
Potter’s positive assessment, along with the digestion of wholesale data from China, attributed to Tuesday’s rise in Tesla stock. Reports indicate that Tesla produced approximately 78,000 vehicles in China during May, compared to approximately 76,000 in April.
Market expectations for Tesla’s second-quarter deliveries are around 445,000 units, an increase from 423,000 units in the first quarter. Notably, we anticipate producing approximately half of the projected 445,000 units in China.