Daiwa Securities Cuts Tesla’s Price Target to $900

Daiwa Securities analyst Jairam Nathan upgraded Tesla from Neutral to Outperform with a price target of $900 (down from $980.00).

“Tesla’s ability to export out of cost-efficient China and history of better managing chip shortages in 2021 could strengthen its competitive position under the current Russia/Ukraine situation.

At the same time, higher oil prices and potential scenario of fuel shortages, especially in Europe, could accelerate the shift to EVs.

While start of production at the Berlin plant could be delayed, recent media reports of Tesla increasing capacity at its Shanghai facility gives it more flexibility to meet European demand.

Media reports indicated that Tesla is expanding its current Shanghai gigafactory to produce close to 1mn units annually.

At the same time, the company is planning to build a new plant in the vicinity of its existing plant with an incremental capacity of 1mn units.

Meanwhile, in the US, the Austin plant, which is on track for initial production in 1Q:22, will raise capacity by up to 500,000 units over time.

On the other hand, the current situation with Russia and Ukraine seems more perilous for Tesla’s competitors. Supply chain disruptions could impact the legacy ICE OEMs more, as was seen in 2021.

Also, uncertainties around fuel prices and supply could hurt demand for higher margin ICE vehicles.

Declining profit contribution from ICE vehicles could slow down investments into EV expansion being targeted by competition.”

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