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It’s been a wild ride for Tesla investors over the past few years. After shares of Elon Musk’s EV giant soared to an all-time high of over $407 in late 2021, the company experienced its worst year in history in 2022. With stubborn inflation, rising interest rates, and recession predictions spooking tech investors, Tesla stock dropped 65% last year. But despite a shaky economic backdrop, 2023 has been a year of recovery.
Tesla stock has soared 158% year-to-date to nearly $280 per share. And top tech analyst Dan Ives, of Wedbush Securities, believes that there’s more room to run for the EV leader after its latest bullish delivery numbers.
Tesla revealed that it managed record second quarter deliveries of 466,000 over the weekend, ahead of Wall Street’s 447,000 consensus estimate. Production in the quarter also rose to 479,700, which Ives said was evidence of ”improved” capacity and “a healthier macro” in a Sunday research note. The numbers are “proof to combat the narrative of a murky backdrop” and should “put the bears back into hibernation mode,” he added.
The famously bullish Ives maintained his buy-equivalent “outperform” rating and $300 price target for Tesla after the data release. Tesla stock rose as much as 8.4% on Monday in the first day of trading after the release of the firm’s second quarter delivery data.
“This delivery number was a massive step in the right direction and is a major positive for the bulls,” Ives wrote. “Tesla continues to play chess while other EV players are playing checkers.”
While some bears have questioned Tesla’s decision to lean on aggressive price cuts throughout 2023, arguing they could lead to margin issues, Ives said the latest delivery numbers are evidence that the cuts have already “paid major dividends” and are stoking demand.
The analyst believes Wall Street will also eventually begin to value Tesla as a “sum-of-parts story,” referencing the popular sum-of-parts valuation technique used by analysts, which should boost consensus forecasts for the firm.
In a sum-of-parts valuation, analysts value the different divisions or subsidiaries of a given business separately and then combine them to reach an overall valuation and price target for the company’s stock. This type of analysis is often used when valuing large conglomerates that own multiple operations which all need to be evaluated using different metrics.
Ives believes Tesla is far more than just an EV company, and therefore, should be valued using a sum-of-parts analysis. He points to the company’s robust supercharger network, energy business, A.I. autonomous driving tech, and “unmatched battery ecosystem” as separate parts of the company that should be valued individually. “With this delivery beat, we believe the sum-of-the-parts story for Tesla is another step towards coming into play,” he wrote, arguing that Tesla’s “golden EV success story” is just beginning to be recognized on Wall Street.
The bear’s take
While Ives and other Tesla bulls took a victory lap Monday, bears weren’t exactly hibernating just yet. Craig Irwin, Roth Capital senior research analyst, held an $85 price target on Tesla and warned of rising competition and a stretched valuation.
“The valuation is just—it’s absurd. It’s egregiously overvalued,” Irwin told CNBC Monday. “And Tesla has over 100 other EV models coming to market to compete against their four main line units. Many of those are going to be wildly successful.”
To his point, Tesla currently trades at over 70 times its trailing 12-month earnings, while the S&P 500 trades at just under 20 times earnings. A Bank of America Research note in June argued that the EV giant is set to lose market share in the U.S. as more legacy car makers push into the EV business. “Specifically, our forecasts suggest Tesla’s market share will decline from a peak of 78% in 2018 to 18% by 2026,” the investment bank’s automotive analysts wrote.
But while Bank of America admitted that “this market share direction is a bit daunting” for Tesla, they noted that it means the company will remain the largest EV maker in the U.S. for years to come. “TSLA is establishing itself as a sizable player in the total U.S. auto market,” they noted. And the latest delivery numbers for the EV giant certainly aren’t what bears were expecting.
