By Senad Karaahmetovic
Shares of Tesla (NASDAQ:TSLA) are up over 3% in pre-open Thursday after UBS analyst Patrick Hummel upgraded to Buy from Neutral.
The $1,100.00 per share price target is maintained while it offers over 50% upside potential.
The analyst says Tesla’s future and operational outlook are “stronger than ever before” due to:
- Record-high order backlog & two new gigafactories ramping up;
- Margin momentum: after the Q2 dip, auto gross margin should structurally exceed 30%; and
- A structural competitive edge in key supply chains.
Hummel is especially positive about Tesla’s “structural competitive advantage in mission-critical areas.” The analyst sees the electric vehicle (EV) maker “best positioned to become one of the top-3 global car makers by 2030.”
“We expect Tesla's vertical integration in semiconductors, software and battery to result in superior absolute growth and profitability in the years ahead. Integration represents a strong competitive edge in an environment of structurally tight supply chains. Batteries are the next industry-wide bottleneck, in our view. Tesla can outgrow peers with a combination of in-house cell capacity, its lead vs. global competitors in using LFP cells and its high share of directly sourced battery commodities, lithium above all,” Hummel told clients in a note.
The analyst sees six catalysts that could help Tesla stock price to recover going forward.
- Shanghai production back to normal (June);
- Sequentially weaker Q2 results (July, well-flagged);
- Another AI day possibly with news about FSD and the humanoid robot (August);
- Steepening Berlin & Austin ramp-up curve (H2/22);
- Auto gross margin sustainably exceeding 30% (Q3 or Q4 results);
- Cybertruck launch (2023).
Finally, Hummel sees an “attractive entry point for a solid high-growth business.”