One thousand and two hundred dollars: this is how much investment firm Piper Sandler expects the stock of Tesla to be worth in a year. That's close to double its current prices, which itself is a huge gain on how much Tesla was worth a year ago.
To say that Piper Sandler is bullish on Tesla is to say nothing. The company produced a 100-plus page report on why the luxury EV maker is set for consistent stock price gains over the long term. But it all boils down to revenue streams and markets. According to the analysts of the investment firm, Tesla has a lot of both—and it is unlikely to run out of either markets or revenue streams anytime soon.
"Indeed, with Tesla's target industries still embracing outdated business models, it may be decades before this company runs out of new opportunities to pursue," they said in a note to clients accompanied by the report.
What's clear is that Tesla is no longer just a carmaker. In fact, the company hasn't been just a carmaker for years now. Still, that's how Tesla is widely seen. Tesla has its solar business—mixed success and all—it has its battery pack business, and it has its services business.
Morgan Stanley recently said Tesla's services business was actually worth more than the car business, calculating that services business to constitute 53 percent of the bank's price target for Tesla. That target is moderate compared to what Piper Sandler expects: $540 by 2030.
"To only value Tesla on car sales alone ignores the multiple businesses embedded within the company, and ignores the long term value creation arising from monetizing Tesla's core strengths, driven by best-in-class software and ancillary services," Morgan Stanley's managing director of research, Adam Jonas, said in a note to clients in December. Related: Oil Prices Continue To Rise As Bullish News Mounts
Piper Sandler analysts agree: "Tesla is targeting multi-trillion dollar markets; there will always be new levers for growth," they wrote in their own note. "Some may scoff at our generous assumptions re: TSLA's long-term potential, but consider this: our model does not contemplate Tesla's eventual entry into the HVAC or auto insurance markets, both of which represent hundreds of billions in market-wide revenue."
But even its core business of carmaking is set for strong performance, helped in no small part by growing support for the electrification of transport both in the United States—under the Biden administration—and in Tesla's key markets in Europe and Asia.
The company recently said its $25,000 car was about to hit markets earlier than expected, probably in 2022. "Tesla could import them to Europe and offer them for €24,900 - addressing vast majority of the European automotive market by revenue," Tesla Facts reported in January, noting that by using Model 3 chassis as a basis, "they won't compromise on safety."
This affordable model will greatly expand Tesla's market share: its rivals, as big as they may be, have yet to convince buyers that their EVs are good cars. This might be hard in light of evidence some of them have inherent problems, such as Volkswagen's EV software. Tesla, on the other hand, already has a reputation, and this reputation has been a major driver of sales for the company, despite its own share of problems such as batteries catching fire and allegedly Autopilot-caused crashes.
Analysts may be overly bullish, but they do have reason to be: Tesla has been profitable for a year now, and car deliveries are growing steadily. Its other business is also growing, with batteries in for a particularly bright future of more solar and wind generation capacity that will need battery storage. This non-car business could become particularly important for the company as the EV space begins to fill up with competitors.
By Irina Slav for Oilprice.com
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