Jefferies Lifts Tesla Price Target to $400
Jefferies analyst Philippe Houchois raised the price target on Tesla (NASDAQ: TSLA) to $400 (from $375) while maintaining a Hold rating.
“We raise estimates again after Q2’s significant auto volume beat.
The strength of Q2 volume in China and Europe seems to validate both the unique value proposition of Tesla vehicles and the risk of vehicle commoditization over time.
Underproduction should help Q2 cash flow but low implied Cybercab output also suggests more delays in ramping up Robotaxis.
We raise Q2 EBIT to $1.45bn (5.1% margin), outer years’ EBIT by ~ 6% and PT to $400.
Volume performance in Q2 beat the most optimistic expectations, confirming the value proposition of Tesla vehicles in terms of price and efficiency despite relatively modest product innovation in recent years.
This in turn appears to validate Tesla’s view on cars becoming commodities and the logic of winding down investment in personal vehicles, but not too fast pending new growth areas.
With reported Q2 deliveries (480.1k units, o/w Models 3/Y 467.8k) largely exceeding consensus of 406k and the 415k estimates we had set mid June, we increase auto revenue further to $21bn including $250m and $500m for ZEV and Leasing.
Non repeat of Q1’s fx and warranty benefit should keep Auto GM slightly below Q1 (JEFe 18%). Slightly better BESS deployment helps take our group revenue to $28.7bn and Group EBIT to $1.45bn.
We assume cash burn $3.0bn on capex climbing $6.9bn, implying a slower ramp in capex and some WC easing after Q1 inventory build, translating into liquidity ~$41.7bn.
Apparent low unit production of Cybercab (Production/deliveries of 8,822/12,364 units respectively in “Others”) suggest the scaling robotaxis is not imminent.
We raise FY 2026 EBIT 4% to $6.2bn factoring higher volume partly driven by higher priced LWB Model Y, and keep FCF outflow ~$7.5bn including capex of $23bn.
We raise outer years EBIT ~6% and remain below consensus by continuing to factor losses from Robotaxis and Optimus in early years.
The relationship between earnings and valuation remains tenuous at best but the multi-year deterioration of growth and earnings has started to reverse.
We appreciate the vision of Space X and Tesla as proxies for long-term US strategies of independence and leadership in space, energy, manufacturing or semiconductors.
We continue to see logic in a merger with SpaceX, on a relatively short timeframe to avoid potential delays in joint investments.
At current prices, we calculate a nilpremium merger would translate into Elon Musk retaining a 55.3% voting stake in the combined entity, leaving room for a potential premium for Tesla shareholders.”
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