Germany-based Berenberg has upgraded Tesla (NASDAQ:TSLA) to a ‘Buy’ rating from ‘Hold’, citing the Elon Musk-led electric car maker has a ‘near-monopolistic opportunity’ and won’t face mass-market EV competition from traditional manufacturers. The firm also raised Tesla’s price forecast from $193 to $464, representing a near 30% rally from Monday’s close.
Berenberg’s Alexander Haissl explains in a note to clients sent Monday that big automakers looking to enter the electric vehicle space have ‘no clear pathway to high-volume EV production’, as they face a steep uphill battle against Silicon Valley-based Tesla. First deliveries of Tesla’s mass market Model 3 that’s seen as the industry-changing vehicle is roughly a month away.
‘With no clear pathway to high-volume EV production for these OEMs [original equipment manufacturers] before the mid-2020s, Tesla will be given a near-monopolistic opportunity to gain market share and outcompete the incumbent automotive industry.’ notes Haissl.
Haissl also predicts that Tesla will invest nearly $33 billion into growth opportunities over the next five years, which represents 40 percent more than Daimler and Volkswagen combined. The analyst believes that Tesla’s ‘best-in-class cost base and production processes’ will allow it to generate 50 percent more profit per vehicle than its competitors in the coming years.
‘Tesla’s disruptive potential encompasses the vehicle, the entire production process and the product-to-market strategy. Once the business reaches scale, the cash generation potential is significantly superior to existing premium OEMs,’ writes Haissl in his note to clients.
According to FactSet, the analyst’s $464 price target for Tesla, from $193, is the highest out of 19 analysts on Wall Street. The upgraded target represents a 29 percent upside from Monday’s $359.01 close.
Tesla shares are trading up over 2 percent at the time of this writing at $367.39.
