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Tesla (TSLA) stock surpassed $1,000 recently bringing CEO Elon Musk closer to a hefty payout. Jefferies increased the price target for TSLA to $1,200.
Tesla Inc (NASDAQ: TSLA) has been making headlines in 2020 with various developments and milestones. In that context, TSLA stock is gaining significantly. It is on a tear that might not slow down any time soon. Historical data reveals that this stock has gained over 130% this year outpacing the general market.
Recently, the price surge has registered multiple all-time highs on data showing solid sales in China. Also, it is boosted by CEO Elon Musk‘s directive to accelerate the production of its commercial semi-truck. The constantly widening gap between Tesla and other legacy automakers may push the electric-car giant’s stock to new records beyond the next year.
Jefferies analysts firm upgraded its Tesla target price from $650 to $1,200 in a note to clients on June 19. The new target represents a 20% leap from June 17’s closing level. Jefferies said that leads in vehicle range, battery technology, and business model are responsible for the generally bullish outlook.
Also, they say that the COVID-19 pandemic will underpin Tesla’s expansion. The team led by Philippe Houchois wrote:
“We see COVID-19 as an accelerator of the transition to EV and renewables, from consumers and public policy. Tesla remains significantly ahead of peers in the product range, capacity, and technology.”
Jefferies Quite Optimistic about Tesla Stock
The analysts maintained their ‘buy’ sentiment for the stock as it traded at $1,004.29 as of 10:36 a.m. ET June 18. Although competitors are introducing new electric vehicle brands to the market, Tesla is far ahead of the pack with its Model Y SUV. The firm’s product range will increase the gap at the front of the market in 2021 when its Cybertruck hits the market.
Battery technology is also pushing Tesla further ahead. Jefferies expects that Tesla will deepen its vertical integration to mitigate environmental effects during production and prepare for massive supply. That development might streamline the company’s business model by assisting distribution activities and reducing the path for product rollout.
According to Jefferies’s upside scenario, the shares will surge to $1,400 on a bigger breakthrough in battery expenses and efficiency. Tesla postponed its ‘Battery Day’ event in May and may reschedule the reveal this June.
Analysts and commentators say that the company might introduce a battery that can last up to one million miles. A product of such magnitude may have extensive implications for recycling requirements, vehicle design, and emissions.
On the flip side, Jefferies’ bearish scenario is dominated by coronavirus-related production delays that would reduce profits in 2021. Shares would then plunge to $800 in the next 12 months according to the analysts. But, Jefferies expects formidable downside protection from the acquisition interest within and away from the automotive sector.
The surging Tesla stock has put Musk closer to getting a major payout which is a part of his scheduled moonshot compensation package. Tesla’s board agreed that Musk had met all the set targets to unleash the first tier of the massive payday. In a recent SEC filing, the company reported that the average value of its value in the past six months surged above $100 billion in May 2020.
That SEC filing was approval for Musk to get the first $700 million in stock options from the scheduled pay deal. In general, Tesla’s estimate for the payout plan states that the package could be worth up to $55.8 billion.
Board members are also benefiting from the rising share prices. Nine other board members hold Tesla shares worth between hundreds of thousands of dollars to billions. For any gains to be made, these Tesla board members may have to sell some of their positions to reap any of the stock’s recent gains.
Hiromichi Mizuno, a Japanese pension fund chief, is the tenth board member who joined in April. His share information is not yet available.
Glass Lewis is recommending that Tesla (NASDAQ: TSLA) shareholders oppose the re-election of Chairwoman Robyn Denholm to the board of directors. Denholm is the former CFO and COO of Australian telecom Telstra.
The firm made that suggestion based on corporate governance issues arising from personal insurance arrangements with CEO Musk. In that arrangement, Tesla declined the renewal of its directors and officers’ liability policy because of high premiums quoted by insurers. Glass Lewis said:
“We are concerned that this D&O arrangement gives the company’s independent directors a direct, personal financial dependency upon the CEO they are tasked with overseeing.”
In other news, the Tesla board and Elon Musk are getting sued over outrageous pay in Delaware’s Chancery court. A pension fund shareholder went to the court on June 17 seeking repayments of what it termed as ‘egregious’ board stock awards. These awards, according to the shareholder, cost the company hundreds of millions of dollars.
The Police and Fire Retirement System of Detroit City sued Musk and the board for lining up stock payouts and benefits worth $8.7 million in 2018 alone. That amount was around 29 times higher than the regular S&P 500 index company boards.
Tesla Stock Boosted by Jefferies
On June 18, the Tesla stock was up about 2% to surpass $1,000 in early trading. The wider market was down about 0.6%. As of June 19, 9:33 AM EDT TSLA is trading at $1,010 representing a 0.55% gain in the last 24 hours. The day’s range is $1,007.14 – $1,015.87 pushing Tesla to a market capitalization of around $186 billion.
The average analyst price target is $700 even after the boost from Jefferies. That is almost 30% below where the stock trades currently. In the last 5 days, the stock has gained 7.8% and 23.42% in the last month.