According to a leading analyst, Tesla is predicted to reach a market capitalization of $1 trillion in the coming year.
Wedbush Securities analyst Dan Ives on Thursday boosted his Tesla (TSLA) - Get Free Report price target to $350 from $310, arguing in a note that the electric-vehicle producer is on track to reach a $1 trillion market cap in 2024.
The boost comes toward the end of another volatile year for Tesla that nonetheless saw the company's stock more than doubling (up 106%).
The bear narrative for Tesla, according to Ives, centers on a reduction in electric-vehicle demand as competition in the sector sharpens.
But Musk's decision to cut prices throughout the year, bringing the average price of a Tesla down more than 20%, was a "poker move for the ages," according to Ives, catalyzing volume growth.
The backdrop of CEO Elon Musk's 2023 price cuts, however, was a year that saw softening growth for EVs. Though the year is set to notch another record for EV adoption, the growth rate of that adoption has been cut nearly in half.
Global passenger EV sales grew 60% between 2021 and 2022. The growth rate between 2022 and 2023, assuming the expected 14 million EVs are sold, is set to land at 34%.
While Ives acknowledged that softening in demand, he contended that "we are still in the early days" of the electric transition.
He predicted that by 2030 about 20% of cars will be EVs.
And with legacy automakers like General Motors (GM) and Ford (F) slowing their investments in EVs, Ives said Tesla will lead the way through that coming transition to full electrification.
Ives expects Tesla's year-over-year unit growth to rise between 25% and 30%, achieving between 2.2 million and 2.3 million units, above the 1.8 million units Tesla is on track to produce this year.
Ives additionally says that Tesla's profit margins — which have crumbled throughout the year due to the company's dedicated price cuts — have bottomed and "should move back above the key 20% threshold during the course of 2024."
Ives added that Tesla's Full-Self-Driving capabilities represent another "incremental value driver" in the Tesla growth story.
Still, the company recently agreed to send an over-the-air software update to address an issue identified by auto-safety regulators that made Tesla's self-driving technology too easy for drivers to misuse.
The company's tech, which requires the hands-on, eyes-on attention of its drivers, is currently at a Level Two designation, which requires constant driver attention. Experts have said that Musk's aversion to using Lidar as a necessary backup to his system will prevent Tesla's FSD from becoming robotaxi-capable.
Over the next 12 to 18 months, Ives said, Tesla's FSD and its Supercharger network combined are valued at an additional $75 per share.
The next phase of the company's growth story, Ives said, is about to begin.
"We view Tesla where Apple was in the 2008/2009 period as Cupertino was just starting to monetize its services and golden ecosystem with [Wall Street] not seeing the broader golden vision at the time," Ives said.
Shares of Tesla closed up 3% Thursday at $254.50. The company has a market cap of around $800 billion.
Describing Tesla as a "tech play" refers to positioning the company as more than just an automotive manufacturer but also as a technology-focused investment. Here's a brief elaboration:
1. Technology Integration: Tesla is known for its integration of cutting-edge technology into its electric vehicles. This includes advanced software, autonomous driving capabilities, and innovative battery technology. The company's approach goes beyond traditional automobiles, reflecting a tech-centric mindset.
2. Innovation in Autonomy: Tesla's emphasis on developing autonomous driving capabilities sets it apart in the automotive industry. The company continually updates its vehicles' software, introducing new features and improvements through over-the-air updates, showcasing a technology-driven approach.
3. Energy and Infrastructure: Tesla's involvement in renewable energy solutions, such as solar energy and energy storage, showcases its broader technological footprint. The company's energy products contribute to a vision of sustainable and technologically advanced ecosystems.
4. Data and Connectivity: Tesla's vehicles are known for their data-driven approach. The cars collect vast amounts of data that can be utilized for improving autonomous driving algorithms and enhancing user experience. The interconnectedness of Tesla vehicles reflects a technology-driven ecosystem.
5. Market Perception: Describing Tesla as a "tech play" can also influence how investors perceive the company. It suggests that Tesla's value is not solely tied to traditional automotive metrics but includes factors related to technological innovation, disruptive advancements, and future-focused solutions.
In essence, labeling Tesla as a "tech play" emphasizes its role in pushing technological boundaries within the automotive industry and positions it as a forward-thinking company at the intersection of automotive and technology sectors.
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