Why One Analyst Believes Tesla (TSLA) Stock Will Reach $360

Tesla (NASDAQ:TSLA) is in focus following a price target upgrade from Wolfe Research and a positive note from Global Equities Research. Across the board, TSLA stock has an average price target of $298.80 among 38 firms with coverage of the stock.

Wolfe analyst Rod Lache believes that the Inflation Reduction Act (IRA) will heavily benefit Tesla. As of now, Lache believes that Teslas made in China carry the highest growth margin in the estimated mid-30% range. He estimates that Teslas manufactured in the U.S. carry gross margins in the mid-20% range. However, with the introduction of the IRA, Lache believes that battery costs may drop to $50/kWh. The IRA will also introduce a $7,500 electric vehicle (EV) purchase tax credit. As a result, the analyst believes that U.S. gross margins could rise by a whopping 10% and become the most profitable production region.

TSLA Stock: Wolfe Research Raises Price Target to $360

Lache also believes that the ramp-up of the Giga Texas, along with ongoing cost reductions, will provide tailwinds for Tesla. On the other hand, competition in Europe and China may hamper profitability.

By 2025, Lache expects the EV maker to post earnings per share (EPS) of $16. The estimate assumes “modest contributions” from side ventures, such as Tesla Energy, insurance, full self-driving (FSD), and charging. The analyst is cautious on several of these areas, such as FSD, but believes that growth in Tesla’s core business will support meaningful earnings upside in the upcoming years.

Meanwhile, Global Equities’ Trip Chowdhry is bullish as well. For the fourth quarter, he expects a “super record quarter,” driven by his estimated delivery figure of 511,000 vehicles. He notes that starting on Sept. 1, multiple delivery trucks carrying the Model Y have left the Giga Austin factory each day. Furthermore, Chowdhry lauds Tesla’s employees for their work ethic and points out that Musk slept in the Giga Austin factory for three nights during August. On top of that, he estimates that the time an EV is made to the EV being put on a shipping truck is 10% more efficient than the prior quarter. On a 20-mile stretch on HWY 101, Chowdhry has also seen about three Model S Plaids on average with a temporary license plate, indicating that the EV was recently purchased.

Tesla has not yet confirmed the date for its third-quarter earnings, although the company is expected to report in mid-October.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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