UBS analyst upgrades Tesla to Buy from Neutral saying the outlook is stronger than ever before

Written by Cláudio Afonso | | LinkedIn | Twitter

UBS analyst Patrick Hummel upgraded on Thursday Tesla stock to Buy from Neutral with an unchanged price target of $1,100. The analyst believes that the company’s outlook is “stronger than ever before” due to three main reasons: the two new gigafactories ramping up, a great margin, and the structure to deal with supply chain issues.

“We upgrade Tesla to Buy (from Neutral) with an unchanged $1,100 PT. TSLA is down ~35% year-to-date in line with other tech stocks, but we believe the operational outlook is stronger than ever before thanks to: (1) record-high order backlog & two new gigafactories ramping up; (2) margin momentum: after the Q2 dip, auto gross margin should structurally exceed 30%, driven by pricing and product & process innovation; (3) a structural competitive edge in key supply chains, resulting in superior growth and profitability,” the analyst said.

“While we cut 2022E EPS by -12% to account for the Shanghai lockdown (still reaching ~50% growth in deliveries y/y though), we raise EPS for the next 3 years by up to 40% resulting in $28 EPS (diluted) 2025E, to be achieved mostly with already known products & production facilities,” he added.

Earlier this week, Tesla showed the most recent Cybertruck prototype at an event with the prodution expected to start in 2023. Reacting to a tweet from a Tesla enthusiast, Elon Musk commented: “It [Cybertruck] will be our best product ever imo”. Also some pictures from the interior were revealed regarding the appearance in Moss Landing, Clalifornia.

On Saturday, Tesla’s CEO Elon Musk unveiled that the 10.13 version of the Full Self Driving technology “is a big deal” and that “should be able to drive to a GPS point with zero map data”.

In the same tweet, Musk also confirmed that the 10.12.2 version of the beta program is now expanding to 100k cars. The U.S. automaker is ramping up the number of beta testers after having only a few thousand people in the third quarter of 2021.

Written by Cláudio Afonso | | LinkedIn | Twitter