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Tesla Is Piper Sandler’s No. 1 "Buy-and-Hold Idea" for Its "Real World AI Potential"

Tiger Newspress01-22

Tesla Motors remains Piper Sandler’s number one “buy-and-hold idea” despite a potentially choppy first half of the year.

The investment firm upgraded shares of the electric vehicle maker and “Magnificent Seven” member to an overweight rating on Monday. Piper Sandler previously had not assigned the stock a rating.

Shares of Tesla have soared 101% in the last 12 months. Analyst Alexander Potter’s new price target of $500, up from $315.

Despite uncertainties surrounding near-term financials, particularly vehicle deliveries and automotive gross margins, the long-term outlook is said to remain promising.

"We expect Tesla to deliver 1.96M units in 2025 (vs. 1.79M in 2024), but we expect >100k incremental units to come from unknown vehicles, and another 70k incremental units from Cybertruck," noted Piper Sandler. 

However, they caution that this forecast is uncertain and potential downside may not become evident until later updates.

On the gross margin front, Piper Sandler maintains a more positive outlook, expecting solid post-quarter performance as long as Tesla stays on track with new product launches.

Looking ahead, Piper Sandler adjusted its long-term delivery expectations, now predicting Tesla will max out at around 4.6 million units per year by 2032. 

The focus, they believe, will shift from launching new cars to popularizing full self-driving (FSD) software. 

"We are now modeling a contribution from FSD licensing," the analysts stated, with Tesla's existing businesses valued at just below $300 per share, inclusive of FSD.

For valuation, Piper Sandler is transitioning to a P/E-based methodology, with their $500 price target based on 120x FY26E EPS.

They anticipate that within a year, investors will gain greater clarity on Tesla's product cadence, allowing a focus on more ambitious topics like FSD efficacy and Tesla's broader A.I. ambitions.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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