A logo of Tesla Motors on an electric car model is seen outside a showroom in New York, June 28, 2010. Reuters / Shannon Stapleton
Tesla Inc.’s most bullish Wall Street analyst predicts the electric-car maker’s dizzying rally will accelerate this year and that the stock will trade in the $640-to-$960 range in early 2021.
New Street Research analyst Pierre Ferragu anticipates the company will sell 2 million to 3 million cars per year after 2025 at industry-leading margins, justifying a market capitalization of $230 billion to $350 billion, or about $1,100 to $1,700 per share.
"The stock will remain volatile, as the spread between bull and bear cases remains wide,” said Ferragu, who boosted his price target to a Street high. "And God only knows what the next controversy will be.”
Tesla is set to report quarterly earnings next week. Shares of the company rose as much as 6.9% to touch $545.90 in New York on Tuesday, and have increased more than 100% over the past three months. A surprise third-quarter profit and strong deliveries for the fourth quarter helped fuel the rally, along with the opening of its China plant.
Ferragu, who raised his price target to a $800 from previous $530, expects the company to beat estimates for free cash flow when it releases fourth-quarter earnings on Jan. 29.
He also predicts 2020 delivery guidance will exceed projections, and sees a potential drop in gross margins in the first half of the year as Shanghai-assembled Model 3s -- which have higher fixed costs per car -- increase in the overall mix.
Earlier on Tuesday, Bernstein analyst Toni Sacconaghi struck a cautious note, saying the Shanghai Gigafactory production could pressure margins in fourth and first quarter.
