logo-loader

Tesla tipped to reach US$850 as Jefferies upgrades to ‘buy’

Published: 10:38 09 Aug 2021 EDT

Tesla Inc - Tesla tipped to reach US$850 as Jefferies upgrades to ‘buy’

Tesla Inc (NASDAQ:TSLA) stock started on the week on the front foot boosted by Jefferies which pitched a new ‘buy’ rating with a US$850 price target, pointing to some 22% upside for the electric vehicle maker.

The broker’s recommendation was lifted from ‘neutral’ as its analyst team believe Tesla can beat rival legacy carmakers which are moving towards the electric market.

Jefferies says legacy brands such as Ford’s Mustang, which has now has an electric version, are compelling but the analysts highlight that Tesla boss Elon Musk doesn’t have to deal with ‘legacy issues’ that the traditional car makers must transition through.

Tesla is meanwhile tipped to boost its margins as a result of ‘better allocated capital’ and accelerating earnings, Jefferies said.

As part of a wider comments on automotive original equipment manufacturers (OEMs), the analysts also downgrade Daimler (ETR:DAI) AG to 'hold' and cut their target price for General Motors Company (NYSE:GM) to US$53 from US$68.

"We are bullish about OEMs' ability to improve margins over time by operating with less and better allocated capital. The first test will be how OEMs rebuild dealer inventories.

"From there, reduced product complexity and direct sales are the next frontiers for structurally better industry ROIC," they added.

Since the coronavirus pandemic hit, the OEMs covered by Jefferies have released more than US$100bn from their balance sheets, equivalent to 15% of their market cap.

"Inventory depletion is now both a threat to sales and an opportunity to rebuild better," the analysts said. 

Currently US car dealers' combined inventory is around 1.04mln units, equivalent to 22 days of sales and around 2.5mln units below historical trends.

Re-building them to dealer/OEM "optimal" level of 45-60 days sales, not even the 70 seen in the past, would add 1.3mln-2.1mln units, or around 8-11% of North American output, "supporting pricing well into 2022 and structural change".

 

Ramp Metals Launches Drilling Program in Pursuit of High-Grade Nickel in...

Ramp Metals CEO Jordan Black joined Steve Darling from Proactive to introduce the company to the public domain and share exciting developments in the mining industry. With a background as a geotechnical engineer and experience in venture capital, including a notable role in taking GoldSpot...

57 minutes ago