Shares of Tesla Inc. jumped toward an eight-month high on Friday after Jefferies analyst Philippe Houchois raised his price target and earnings estimates, saying concerns over demand in the power industry's key Chinese market have now been put to rest.
And regarding concerns about the negative effects of the global semiconductor shortage on automobile production, Houchois said Tesla is better positioned to deal with the shortage than its peers.
The stock TSLA, climbed 2.0% towards a fifth straight daily gain in midday trading. The 6.3% rise this week would mark the eighth weekly gain, the longest stretch since 12 - week streak ended in February 2020.
Houchois raised his stock price target to $950, which is 7.6% above the Jan. 26 record low of $883.09 from $850, as his research and analysis suggests higher capacity ramp and sustained demand. He e reiterated the buy rating on Tesla since August.
For some time, the narrative has been legacy original equipment manufacturers closing the gap; we see little evidence that Tesla continues to challenge at multiple levels, Houchois wrote to clients in a note to clients.
The final details of Q 3 also showed China domestic sales of 73.6 K units, put to rest concerns about domestic demand, while annualized Q 3 output yields 530 K, i.e. Shanghai runs at more than full capacity, he added.
Houchois raised his 2021 estimates for adjusted earnings per share from $5.59 and for revenue to $54.09 billion from $53.62 billion, which are now well above the FactSet consensus for an EPS of $5.30 and for revenue of $51.05 billion.
He said that while Tesla hasn't been immune to supply disruptions, it has outperformed its peers in sourcing chips.
From discussions with a senior expert in semiconductor sourcing and manufacturing, we understand this partially reflects Tesla in-sourcing chip design with the ability to effect faster redesign and secure more direct souring than peers, Houchois wrote.
What is also helping Tesla outproduce its OEM peers is the design of its manufacturing facilities, which are focused on simplicity and flow, Houchois said.
In a global auto industry plagued by complexity, Tesla continues to reduce complexity and set new standards for simplicity of design and assembly, he wrote.
Tesla's stock, which is on course for the highest price closing since Feb. 9, has soared 22.7% over the past eight weeks and held 86.0% over the past 12 months. The SPX index of S&P 500 gained 28.1% in the past year compared to the 200 or 1,000 indexes.