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Electric vehicle and renewable energy products manufacturer Tesla Inc (NASDAQ:TSLA) had a great run on the stock market yesterday as its share price crossed $1,700 during the day. However, before market close, the price dropped below Friday's closing price as Tesla ended up losing market value instead of gaining it. The drop, while striking in nature wasn't particularly surprising, as share prices often self-correct themselves after impressive bullish runs such as the one Tesla is experiencing.
This run has been fuelled partly by Wall Street's high price targets for Tesla and partly by investor optimism in its ability to turn a profit for the second quarter of 2019. And despite yesterday's drop not only is Tesla up 3% in pre-market trading, but analysts themselves haven't changed their tune about the company's future.
The latest analyst to report unbridled optimism about Tesla is Piper Sandler's Alex Potter who raises Tesla's price target significantly due to the company's technological strengths.
Tesla Price Target Hike Is Based On Long Term Optimism About Company's Future
Piper Sandler's new price target for Tesla sits at a whopping $2,322/share and it represents a growth of 147% over the research firm's previous price target of $939/share. Analyst Potter maintains an Overweight rating for the shares, and the price target hike follows a long list of investment banks who have hiked their price targets for the electric automaker and expressed optimism for its future.
For his part, Potter is justifying the price hike on the basis of Tesla's potential to effectively cater to the needs of what the analyst describes as the "mobility ecosystem". He believes that Tesla's ability to influence and affect this ecosystem will not change over the "next decade" as-per analyst report aggregation platform The Fly.
Tesla's unique culture of being an electric vehicle manufacturer and a tech company has placed it at the epicenter of bringing 'tech to your cars'. The company has designed its own hardware to aggregate the data from the various sensors in a vehicle to enable software-assisted driving, and these features, which derive heavily from Silicon Valley's innovational prowess, have the potential to transform the automotive industry in the future.
The new price target factors in a staggering 55% upside over Tesla's closing share price yesterday. Tesla plans to link all of its vehicles via software to enable them to provide ridesharing services, under a scheme that has been dubbed as Robotaxi. Through Robotaxi, the company intends to take on traditional ridesharing service providers such as Uber and Lyft, and via automated vehicle operation, it also hopes to remove the vehicle's driver from the equation.
Potter also does not recommend Tesla investors to sell their shares for the time being, despite the stock's massive gains on the open market. This is natural given Piper Sandler's high price target for the company. The analyst also states a reality for Tesla that most of its watchers are likely aware off i.e. the biggest deterrent for the company's share price rising to new high levels on the open market is Tesla itself, with the automaker's capacity constraints also constraining its share price growth.
Piper's price target is also based on Tesla's software strengths, which are likely to be reflected in Robotaxi once the service passes all regulatory concerns and is available to the public at large. Potter also doubts that Tesla's competitors can catch up to it and he believes that the uppish trend exhibited by the company's share lately will continue.
Tesla's earnings report for the second quarter of 2020 is due on the 22nd and analysts and investors will be looking at the company's bottom line and at its ability to deliver vehicles and sustain market demand in a highly uncertain post-pandemic global economy. Tesla's ability to deliver in China is also likely to come in the limelight owing to the country's early economic recovery and a large electric vehicle market.