Tesla will gain another 14% as company closes in on 500,000 annual deliveries, Wedbush says

• Strong third-quarter deliveries set Tesla up for a healthy earnings beat on Wednesday and a sales milestone before the year is out, Wedbush analysts said.
• "Improved manufacturing efficiency and shining [Gigafactory] 3 success in China" are key drivers of the company's near-term success, the team wrote in note.
• The success abroad brings Tesla closer to hitting 500,000 deliveries in 2020, an achievement that was a "pipe dream" for the automaker and its peers just six months ago, Wedbush added.
• The analysts boosted their price target on Tesla shares to $500 from $475, implying a 13.7% climb from Friday's closing level over the next 12 months.
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With electric-vehicle demand rebounding from a mid-2020 slump, Tesla is on track to beat earnings expectations and reach a delivery milestone, Wedbush analysts said.

The automaker's third-quarter deliveries came in above expectations, with sales of its Model 3 sedan driving the strong reading. Tesla is set to report its third-quarter earnings on Wednesday, and "improved manufacturing efficiency and shining [Gigafactory] 3 success in China" could lead to a Street-beating report, the team wrote.

The analysts lifted their price target on Tesla shares to $500 from $475, implying a 13.7% climb from Friday's closing level over the next 12 months. Wedbush maintained a "neutral" rating on the shares.

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The 139,300 deliveries last quarter also bring Tesla closer to its target of 500,000 deliveries this year. Pent-up demand in China and areas of robust sales in Europe are key in helping it reach the goal. The 500,000-delivery target is "a line in the sand that was a pipe dream six months ago as Tesla (and other auto players) have navigated this unprecedented COVID backdrop," the analysts said.

China in particular could "markedly increase" Tesla's profitability over the next few years as the country comes to represent more than 40% of the automaker's annual sales, Wedbush added. Positive earnings represent the "hearts and lungs" of bullish investors' hopes after years of quarterly losses.

With Model Y deliveries ramping up into the fourth quarter and China demand surging ahead, the automaker is set to turn its Wednesday earnings release into "another step forward" compared with its struggling peers, the team wrote.

Tesla closed at $439.67 per share on Friday, up 430% year-to-date.

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