Tesla bull sees the stock soaring another 18% on higher EV demand in China and potential boost from adjustments to US tax credit
- Tesla's price target was raised to $225 from $220 at Wedbush Securities on Monday.
- Tesla's price cuts in China are boosting demand and tax credit changes in the US will be a tailwind.
Tesla bull Wedbush Securities said a rise in demand for Tesla cars in China and a favorable tax credit adjustment for electric vehicles in the US should propel the company's stock by nearly 20% from current levels.
Analyst Dan Ives in a Monday note to clients raised its Tesla price target to $225 from $220, implying an 18% upside from Friday's closing price of $189.98. The stock rose by 2.9% during Monday's session, potentially adding to its more than 50% surge so far in 2023.
"Tesla is now positioned well with its price points with demand outstripping supply so far in 2023," said Ives in explaining the impact on demand in China after Tesla cut prices on its Model Y and Model 3 vehicles.
"While China demand was a headwind for Tesla in 4Q with the lockdown and macro uncertainty, we are now seeing a noticeable turnaround for Chinese EV buyers favoring Tesla vs. domestic players," such as BYD, Nio and XPeng, he said.
Wedbush said its survey work shows the price cuts have swayed three of every four buyers of electric vehicles in China. It also said Tesla is trending above its projection to deliver 1.8 million vehicles worldwide in 2023.
At the same time, Wedbush said Tesla should have a tailwind from the US Treasury Department's updated rules on a new electric-vehicle tax credit that will make more models eligible. The new guidelines expand the definition of an SUV, making more vehicles qualified for a $7,500 incentive aimed at bolstering demand for cleaner cars.
Tesla over the weekend raised the price of its Model Y Long Range version to $54,990 and the Performance version to $57,990.
"With Friday's move by the Biden Administration to change the definition of EVs classified under the $80k SUV cap, this now gives Tesla another lever with the Model Y," said Ives. "Overall, this was a smart move by the Beltway as with GM (LYRIQ), Tesla, and others heading down this path many EV crossovers are no longer bumping against the $55k threshold heading into a pivotal 2023 for the EV industry."
Tesla stock plunged 64% last year, hurt by rising interest rates and concern that Tesla CEO Elon Musk was overly focused on Twitter, which he bought in October.
The "Twitter overhang [is] slowly moving into the background for Tesla's stock," said Ives.
"We believe with Twitter itself starting to stabilize more from an advertising perspective along with cost-cutting kicking in, the worries around Musk needing to sell more Tesla stock to fund Twitter losses has moved into the background," he said.
But the social media site "remains a wild card in the overall Musk ecosystem" until a new Twitter CEO is named, the analyst said.
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