Cars and Drivers

Meet Tesla's Most Bullish Call on the Street

Chris Lange

Published: October 4, 2017 11:45 am

Last Updated: January 12, 2020 7:31 am

Tesla Inc. (NASDAQ: TSLA) is perhaps one of the most favorite cult stocks in the market today. It has consistently posted losses year after year, yet investors still flock to this company. The cult of Elon Musk, despite these losses, sees exciting technological opportunities in batteries, electric vehicles (EV) and even artificial intelligence (AI).

We’ve seen this stock jump on as little as a positive tweet from Musk, and even ignore negative calls from industry analysts. However this most recent call has earth-shattering implications for Tesla.

The cult gained another follower late on Tuesday in the form of a Nomura Instinet analyst, Romit Shah, who now has the most bullish call on Tesla. He issued a Buy rating for Tesla with a $500 price target, implying upside of about 44% from the current price level.

According to Shah, Tesla will see unprecedented revenue gains, which he expects to rise from $8 billion in 2016 to as high as $58 billion by 2021. Take a moment. That is a roughly a 625% gain over five years.

Shah draws a parallel between Tesla and Intel in the 1990s. He suggests revenues can scale this rapidly, when the firm owns both the manufacturing and much of the supply chain. Although he points out the limiting factor for PCs was processor performance, whereas for EVs it is cost and battery range.

Currently the Model 3 costs $140 per mile of range, compared with the competition’s $236 per mile of range, according to the analyst.

Another main assumption in Shah’s report is that Tesla will benefit from largely inferior competition, which could drive the growth he is suggesting. Shah also believes that Tesla will work though its current issues with its Model 3 production, ultimately generating upward of mid-to-high 20% gross margins by 2020.

There are other analysts that don’t subscribe to Tesla, and actually believe that other companies such as General Motors (NYSE: GM) will more than overtake Musk’s operation. Deutsche Bank takes a different perspective on Tesla, and has a Hold rating on the stock.

Shares of Tesla were last seen up 2.6% at $357.02, with a consensus analyst price target of $318.63 and a 52-week range of $178.19 to $389.61.