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JMP said its new price target of $1,060 for Tesla (TSLA) stock, is one of the highest on Wall Street and implies earnings multiple that “may seem excessive”.
Shares of electric carmaker Tesla Inc (NASDAQ: TSLA) grew on Tuesday after JMP Securities upgraded it and set a price target of $1,060 per share. That would mean that Tesla is among the stocks with the highest level on Wall Street.
From JMP Securities it’s said that the “investors may find themselves with additional near-term opportunities to buy the stock as Tesla works through the first half of 2020 and the impact of COVID-19 becomes apparent.”
JMP analyst Joseph Osha upgraded stock to Market Outperform from Market Perform and the high raised target indicates approximately 43% return against Monday’s closing prices. The interesting thing is that Osha previously used to maintain a Market Perform rating on the stock since October.
Valuation Supported by Tesla (TSLA) Growth Potential
On yesterday’s closing, TSLA was trading at $745.51. At the premarket, shares of Tesla rose 3% to trade at $769.
Osha’s new call predicts a $198 billion market capitalization and 32x EBITDA multiple based on 2021 estimates. That would make the Tesla stock quite expensive in comparison to other car stocks. However, Osha said this brave valuation is supported by Tesla’s growth potential compared to its rivals.
“TSLA is on track to show a CAGR [compounded annual growth rate] of 23% for 2018-2020, and we think that rate of growth appears sustainable for the next 4-5 years. Second, we also argue that the $198 billion market capitalization implied by our price target does not seem unreasonable if one considers the potential for TSLA to be a 1.8 million unit company by 2025. That is more than 3x our forecasted 2020 volume. TSLA requires no additional market share gains to get to that number, and our analysis already assumes that most of the Chinese market is inaccessible to TSLA.”
In January, the company pledged to deliver more than 500,000 units in 2020, after handing over 367,500 units in 2019.
Osha calculated that Tesla already took approximately 40% of its current approachable market saying:
“A perusal of offerings from competitors suggests that TSLA’s market position should continue to be dominant.”
He also added that the recent broader stock-market pullback gave the opportunity for investors to enter the stock.
Same Tesla Sales Goals for Q1 2020 as in Q4 2019
Also, let’s not forget that earlier this week, the company reported that its first electric pickup is boosting sales in North America even though it is not coming to market until the next year. It is also the first time Tesla buyers don’t have access to any federal tax credit for buying a car in the United States.
Sources familiar with the situation told Electrek that the company has given the same sales goals to its North American team for the first quarter of 2020 as they were in the fourth quarter of 2019.
Furthermore, we shouldn’t minimize the fact that only last week, Tesla was pretty much down. First, it was announced that its car registrations in China almost halved in January compared with December 2019. Then, the electric carmaker said it will discontinue its joint effort with Panasonic to produce solar panels, after the Japanese firm decided to withdraw from the partnership to “streamline the company’s global solar energy operations.”
And after all that, Tesla’s shares were downgraded by Jefferies from “buy” to “hold,” while lifting the price target from $600 to $800.
However, Tesla is acting like a modern Phoenix, rising from the ashes every time. As the Chinese production is going on and the COVID-19 impact seems to be softened, we don’t see more reasons why the Osha’s predictions would be wrong.