Cathie Wood recently stuck to her $3,000 price target for Tesla (TSLA), despite the stock’s recent meltdown and her decision to offload some of her shares, though the electric vehicle (EV) maker remains her Ark funds’ top holding.
Analysts agree with the popular investor’s five-year target, noting that Tesla’s market lead and promising growth will likely remain unmatched by a sea of rivals rushing to unseat it.
“They have a lot of things working in their favor and no real competitors,” says Noah Hamman, CEO of ETF investor AdvisorShares, which recently bought $1.8 million of Tesla equity.
Tesla’s rush to beef up its infotainment services, which recently brought TikTok and the Sonic the Hedgehog game to its fold, coupled with the eventual roll out of Starlink satellite Internet, will sharply boost futures margins, notes Hamman. This, on top of plans to significantly boost production and even launch a possible smartphone, should help propel the shares to $3,000 by 2026/2027, he adds.
Higher margins
“In five years, Tesla will have significant subscription services similar to Netflix or Disney +, in addition to the Starlink launch, autonomous driving and even insurance products,” Hamman enthuses. “This will put them far ahead of everyone else.”
Meanwhile, Apple (AAPL) is working on its own Apple Car EV by 2025, fueling speculation about how it will impact Tesla. The project envisages a fully autonomous, limousine-like vehicle with no steering wheel or pedals (a prototype could come next year) but the project has been hard to develop and triggered several management departures since it launched eight years ago.
Hamman is not worried about the Apple car.
“Apple is great at lots of things and has built a great business around the iPhone and its watch but can it do the same with cars? I am not sure,” he muses. “Think about the growing pains Tesla has experienced. Does Apple want to go through that? They might be better off partnering with Tesla to find a way to add their tech in their vehicles.”
Whatever happens, Apple and other direct Tesla rivals such as Rivian (RIVN) or traditional automakers like BMW (BMW.DE) or GM (GM) will need to spend billions to catch up with Tesla, which controls 70% of the American EV market, according to Hamman.
CFRA analyst Garrett Nelson agrees Tesla’s stock can triple in five years, as long as Musk continues to execute well.
“It’s not an unreasonable target,” he says. “A lot of things have to go right but if you look at their guidance, they are planning for a 50% annual increase in auto sales [helped by the new Texas and Berlin factories] over the next decade so there’s lots of growth ahead.”
20 million cars
According to its latest Impact Report, Tesla wants to make 20 million cars annually by 2030, over 20 times its 900,000 expected deliveries this year.
While ambitious, Hamman notes bolstering capacity to those levels won’t be easy.
“They are going to have to make huge investments and [manufacturing/logistics] improvements,” he says. “There will be speed bumps along the way. Their growth won’t be a straight line.”
Others are more skeptical.
Wood’s and other super-bull price projections are overhyped, says Oanda Analyst Ed Moya. They might soon be curbed since U.S. Senator Joe Manchin recently rejected President Joe Biden’s Build Back Better plan to boost green energy adoption, delaying and/or potentially killing the legislation, he adds.
“Cathie got caught in the EV market hype but I think her and a lot of price targets are going to be slashed after Manchin’s Grinch-like move could bring $2 trillion of investment losses,” notes Moya. “This, on top of a few rate hikes, is not a friendly environment for risky assets.”
Moya says Tesla could be due for another pullback before bouncing back and that even if it does, he doesn’t expect its shares will surpass $1,200 next year. In fact, he has an $1,100 target.
Tesla bottom?
“I see it vulnerable to another $50 to $100 drop but that should be the bottom and you will start to see a lot of long-term buyers emerge,” Moya said.
Moya also threw cold water on Tesla’s autonomous or full self driving (FSD) service which he doesn’t think will be fully available as quickly or successfully as some envisage.
“When it comes to FSD or autopilot, I expect delays,” he says. “For starters, there are going to be tremendous regulatory hurdles.”
Despite the challenges, Wedbush Analyst Dan Ives says he remains “steadfastly bullish” on Tesla, adding that its recent drop is a “golden buying opportunity.” With an $1,400 price target, he sees Tesla clinching 50% of the $5 trillion global EV/software market by 2031, much of it from growing China deliveries.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
www.nasdaq.com