A Jefferies analyst sees Tesla rising 30% in 12 months, even as Elon Musk sells stock. Here's why he has the most bullish call on Wall Street.
Aly Song/Reuters
- Jefferies' Philippe Houchois has the most bullish Tesla forecast on Wall Street, seeing a 30% rise in the next 12 months.
- He says Tesla could eventually become the "everything energy company," in the same way Amazon is the "everything store."
- Houchois thinks Tesla's profit margins will stay strong, even as it takes on legacy auto rivals by releasing cheaper models.
Elon Musk may be selling Tesla stock at a rapid pace — but one veteran strategist sees the share price jumping another 30% over the next 12 months and recommends that investors buy it.
Philippe Houchois, autos analyst at Jefferies, has the most bullish 12-month price target on Wall Street at $1,400. That compares with Tesla's Friday morning price of $1,074.
He reckons Tesla will continue to rapidly scale up production and maintain strong profit margins, even as it produces cheaper models to better compete with legacy car companies.
In the future, Houchois told Insider, Tesla could even become the "everything energy company," in the same way Amazon is the "everything store."
Tesla's stock price has skyrocketed roughly 1,500% over the last two years. Investors, flush with cash from the huge coronavirus-era stimulus packages, have piled into the company, betting that it will lead the green revolution in transport.
There is still an army of skeptics who say that Tesla's stock price — it's now the biggest carmaker in the world by market capitalization — is all out of proportion. Critics argue that Tesla has a long history of underdelivering, and that its market valuation is based on highly speculative predictions about future sales.
Yet Houchois said: "The way Tesla is structured — or their strategy — is they basically challenge, at multiple levels, the way the industry operates: the way cars are designed, the way cars are sold, the software."
He's been impressed with Tesla's recent results. It delivered its ninth-straight profitable quarter in the third quarter, with an operating margin (a key measure of profitability) of 14.6%, up 10 percentage points from two years earlier.
Houchois pointed out that Tesla is more than twice as profitable as Volkswagen. And he sees numerous factors, including Tesla's direct-sales model, as helping preserve its strong margins.
The analyst said Tesla's self-professed aim of ramping up production to 20 million cars by 2030, from an estimated 890,000 in 2021, is "outrageous" and won't happen. That said, he's willing to consider a scenario where Tesla produces more than 8 million cars by that point, giving it a roughly 10% share of the global market.
Houchois, who's worked on Wall Street for more than 15 years, said Tesla's plans to produce a cheaper car would help it seize market share from older companies.
The automaker has long planned a $25,000 car, which could come in 2023. But critics say Tesla's history of delays — the Roadster 2, Cybertruck, and Semi rollouts have all been pushed back — mean it's far from certain to arrive any time soon.
Tesla is a clean-energy company as well as a car company, however, and Houchois said this gives it an edge in a world fast transitioning away from fossil fuels, with the two focuses complementing each other.
"It's almost like the way that Amazon, from a book-seller, became the 'everything store.' Then the long-term bullish story is Tesla becomes 'everything energy.'"
Many others on Wall Street are far from convinced. JPMorgan analyst Ryan Brinkman, for example, has a 12-month target price of $250.
He said in his last note in October that Tesla's target to deliver 20 million cars by 2030 is "extreme blue-sky" thinking. "And yet, something much more than this seems already baked into the shares, given Tesla's market capitalization today."