This is the 1 thing that needs to happen for Tesla to soar another 50% to a $1.5 trillion market cap, according to Wedbush

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This is the 1 thing that needs to happen for Tesla to soar another 50% to a $1.5 trillion market cap, according to Wedbush
Tesla will require employees in a Nevada plant to wear masks, regardless of vaccination status. David Butow/Getty Images
  • Tesla hit the $1 trillion market cap milestone for the first time ever on Monday.
  • The electric vehicle manufacturer could see 50% more upside to $1,500 per share, Wedbush said.
  • This is the one thing Tesla needs to do to continue its record surge to a $1.5 trillion valuation.

Tesla's 13% surge on Monday to a $1 trillion valuation is likely not the end of the electric vehicle leader's historic rally, according to Wedbush analyst Dan Ives.

In a Tuesday note, Ives outlined the one thing necessary for Tesla to continue its bull run and surge an additional 50% to $1,500 per share: "supply, supply, supply."

"Right now Tesla has a high class problem of demand outstripping supply with this issue now translating into ~5-6 month delays for Model Ys, Model 3s in different parts of the globe," Ives said.

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Supply chain bottlenecks and semiconductor shortages have put a dent into car production for not just Tesla, but virtually every automaker in existence.

Tesla CEO Elon Musk agrees. In a response to news of Tesla's deal to sell 100,000 vehicles to Hertz, Musk tweeted on Monday, "Strange that moved valuation, as Tesla is very much a production ramp problem, not a demand problem."

To alleviate supply constraints, Tesla will need to quickly ramp up production in its new Berlin and Austin car factories, Ives said. This will help reduce production bottlenecks and enable Tesla to deliver 2 million vehicles annually by the end of 2022. Tesla is on track to sell nearly 1 million vehicles in 2021.

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If Tesla's supply can catch up with demand, the company could see follow-on bulk orders from other rental car companies that would like to electrify their fleet, according to Ives.

"We also expect more bulk orders globally will follow Hertz' lead from competitors in the rental car industry as Tesla now has the muscles and production to meet these mass orders," Ives said.

Additionally, Ives noted that a rebound in demand from China remains crucial for Tesla to extend its current growth trajectory, even as it faces intense competition from local competition like Nio and XPeng.

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"For 2022, we estimate China will represent 40%+ of global deliveries for Tesla, speaking to how important this region is to the longer-term bull thesis for this story as well as broader EV demand," Ives explained.

But without supply constraints being eased, Tesla will have a difficult time living up to its lofty expectations.

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